Similien Corporation Produces and Sells a Single Product

question 84

Multiple Choice

Similien Corporation produces and sells a single product.Data concerning that product appear below: Fixed expenses are $300,000 per month.The company is currently selling 5,000 units per month.The marketing manager would like to cut the selling price by $14 and increase the advertising budget by $17,000 per month.The marketing manager predicts that these two changes would increase monthly sales by 1,400 units.What should be the overall effect on the company's monthly net operating income of this change?

• A)increase of $64,200
• B)increase of $215,400
• C)decrease of $64,200
• D)decrease of $5,800

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Definitions:

Supply Curve

A graphical representation of the relationship between the price of a good and the amount of it that producers are willing to supply.

Equilibrium Price

The market price at which the supply of an item matches its demand, resulting in an efficient market condition where there is no excess supply or demand.

Inverse Demand Function

A mathematical function that expresses price as a function of quantity demanded, depicting how the market price of a good will adjust to balance demand with supply.

Inverse Supply

A concept describing the relationship between the price of a good and the quantity supplied, typically showing that as price decreases, the quantity supplied decreases.