Royersford Knitting Mills, Ltd....

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Question

Royersford Knitting Mills, Ltd., sells a line of womens knit underwear. The firm now sells
about 20,000 pairs a year at an average price of $10 each. Fixed costs amount to $60,000, and
total variable costs equal $120,000. The production department has estimated that a 10 percent
increase in output would not affect fixed costs but would reduce average variable cost by 40
cents. The marketing department advocates a price reduction of 5 percent to increase sales
total revenues, and profits. The arc elasticity of demand with respect to prices is estimated at
2.

 

Solution ID:350971 | This paper was updated on 26-Nov-2015

Price : $25
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