Orwell Is About to Introduce a New Product and Has

question 49

Multiple Choice

Orwell is about to introduce a new product and has established a target cost of $144 and a target margin on sales of 40 per cent. What is the target price?

• A) $200
• B) $225
• C) $240
• D) $280

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Definitions:

Marginal Private Benefit

The surplus value that consumers or producers get from buying or making an extra unit of a good or service.

Marginal Private Cost

Marginal private cost is the cost that a producer incurs in making an additional unit of a good or service, excluding any external costs.

Socially Optimal

A state in which resources are allocated in the most efficient and equitable manner from a societal perspective.

Network Externality

A situation where the value or utility of a product or service to one user increases with the number of other users of the same or compatible products or services.