[The Following Information Applies to the Questions Displayed Below

question 66

Multiple Choice

[The following information applies to the questions displayed below.]
Summit Products,Inc.is interested in producing and selling an improved widget.Market research indicates that customers would be willing to pay $90 for such a widget and that 50,000 units could be sold each year at this price.The current cost to produce the widget is estimated to be $65.
-If Summit Products requires a 25% return on sales to undertake production,what is the target cost for the new widget?

• A)$65.00
• B)$67.50
• C)$80.00
• D)$81.25

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Definitions:

Economically Efficient

Refers to a situation where resources are allocated in a way that maximizes the net benefit to society.

Revenue

The income generated from normal business operations and includes discounts and deductions for returned merchandise.

Consumer Sovereignty

The principle that the consumer's preferences determine the production of goods and services within an economy.

Market System

An economic system where decisions regarding investment, production, and distribution are guided by the forces of supply and demand and prices mediate transactions.