Last year, a toy manufacturer introduced a new toy truck that was a huge success. The company invested $4.50 million in a plastic

Last year, a toy manufacturer introduced a new toy truck that was a huge success. The company invested $4.50 million in a plastic injection molding machine (which can be sold for $4 million immediately) and $300,000 in plastic injection molds specifically for the toy (not valuable to anyone else). The cost of labor and materials necessary to make each truck runs about $4. This year, a competitor has developed a similar toy, significantly reducing demand for the toy truck. Now, the original manufacturer is deciding whether it should continue production of the toy truck. If the estimated demand is 100,000 trucks, the break-even price is $ per truck.


Break-even price =  $7


The break-even price is the price at which the the total contribution from the sale is equal to the fixed cost of $300,000.

(x- 4)× 100,000 = 300,000

100,000X - 400,000 = 300,000

100,000X = 300,000 +  400,000

x= 700,000/100,000

X = $7

Break-even price =  $7

$23 per truck


Break- even analysis:

2,000,000 ÷ 100,000

= 20 per truck

Break-even price per truck :

= Price per truck + Labor and the cost of materials for each truck

= $20 per truck + $3 MC per truck

= $23 per truck

Relevant costs = 2,000,000

Note: (not $2.6 because the $2.5 million paid for the injection mold machine and the $100,000 in molds are sunk costs irrelevant to the discussion as they have already incurred)

Quantity  = 100,000

If the company can sell the truck for $23, they should stay open.

If they are unable to charge $23 per truck then they should shut down.



The computation of break even is shown below:-

Total cost =$2,500,000 + $100,000 + 3Q

Total revenue = Profit maximization


= Profit maximization -$2,600,000 - 3Q

Therefore the break even point total profit must be zero

PQ - $2,600,000 - 3Q = 0

P = ($2,600,000 + 3Q) (Q)

Assuming Q = $100,000

P = ($2,600,000 + $300,000) ÷ (100,000)

= $29

6).Option A. Division of labor

Division of labor is defined as the allocation of various parts of a manufacturing process assigned to different people in order to increase the efficiency. Furthermore, distributing a job or task into many technical parts, among a single or few number of workers assigned to every part. In mass production division of labor plays a significant role. Division of labor is simply the division of tasks in , e.g, in a manufacturing plant. Each and every worker perform a certain duty. Which in results boosts efficiency and productivity.

7). Option B. A paper cutting machine

There are two types of costs namely variable costs and fixed costs. Fixed costs are the costs which are fixed an cannot be decreased or cut down in the short term. Fixed costs usually includes bill payments, physical structure of a company, rent, and machinery (in this case paper cutting machine). Variable costs are the costs which can be increased or decreased in the short term for example, labor and inputs. In case if a company is in financial loss situation or poor financial circumstances, the company can reduced their staff (labor) but the fixed costs cannot be cut down such as rent of the building or bills and most importantly machinery.

8). Option C. Form Utility

Form utility refers to the certain product or service that a company offers to its potential customers or clients. The value seen by a consumer or customer in the finished product is called Form utilities. The company emphasize on the increase in form utility by making of a product available for the final consumption on a way so that it is more beneficial for the customer in this form, rather than the materials in the raw form used to produce it.

9). Option B. Depreciation

Depreciation is defined as the monetary value of an asset reduced or decreased over the time due to its use, its wear and tear, and its obsolescence. Such as Machinery ( cars , machines), equipment (electronic devices, cell phones), currency. For example, when a new model of a car is launched the previous model loses part of it value or this could happen due to the use (wear and tear) or deterioration.

10). Option B. Paint

The cost f goods and services are the costs that must be included into the account of the costs of giving the services or making the products. In this case paint is the direct cost of goods and services for the company that paints houses. On the other hand flyers falls in the promotion costs. Whereas the van and the fuel used for commute are variable costs.

11). Option A. Fewer workers will be needed

In this case the increase in the productivity means increase in the production per worker. Like if the productivity increases definitely workers  will become more productive which results in the production of more goods produced per worker and if the demand is in elastic or not very elastic (as in  this case). Which means that the demand is not sensitive to the reduced or falling prices of goods then the definitely less or fewer workers will be needed to produce and supply the same amount of product.

12). Option B. Labor

The Law of diminishing returns could be applied to the three factors of production i.e. Land, Labor, and Capital, but it is commonly used to analyze the amount of production that will be attained by the adding additional unit of labor. Generally an additional unit of labor tend to produce diminishing levels of output for example, a worker will be able to produce 30 units per day, while on the other hand extra worker will produce only 27 units per day.

13). Option B. Providing a delivery service

Providing a delivery service is a way to increase possession utility for refrigerator. By making an increase in the possession in the way to ensure that you have the refrigerator or any other product that you are purchasing. Possession utility is the value which customers gets while buying a product. Possession is referred as the physical access of a product what a customer has purchased.

14). Option B. A company that makes many sales

Economies of scale is referred as where large organizations have the advantage over the small organizations. Which means the larger the organization selling and producing more products, the lower the cost compared to the small organizations. So an organization which makes larger sales has the cost advantages that the company will exploit by expanding their production size.

15). Option D. By the amount a consumer is willing to pay for it

The value of a product is calculated by the ratio of its quality to its price and Prices of products are determined by supply and demand. The greater the value of product, the better will be its position among competitors. Thus either increasing the quality or reducing the price of certain product will increase the chance that the consumer will select that product than the competing product.  So the value of the product is determined by the amount a consumer is willing to pay for it.  

Aah i think i know it

Answer and Explanation:

The computation is shown below:

1.  The break even price per shirt is

Fixed cost per unit t-shirt is

= $24,000 ÷ 8,000

= $3


Variable cost per shirt = $9

So, the break even price per shirt is

= $3 + $9

= $12

Now if George sells 50% more tshirt then total shirt sell is

= 8000 + 0.5 × 8000

= 12000


Fixed cost per shirt is

= $24,000 ÷ 12000

= $2


Breakeven price per shirt will be

= $2 + $9

= $11

2.  The present value of the return is

= 30 ÷ 1.25 + 30 ÷ 1.25^2 + 30 ÷ 1.25^3

= 24 + 19.2 + 15.36

= 58.56 < 80

As the present value is lower than the investment made so the investment is not profitable  

3. The investment made in human capital with respect to lawyers would be considered as an after investment that hold-up

Therefore this is a true statement


The total cost of the truck is

TC = $2,500,000 + $200,000 + 4Q

And, The total revenue is


So, the total profit is

TR = PQ - $2,700,000 - 4Q


PQ - $2,700,000 - 4Q = 0

P = $2,700,000 - 4Q ÷ Q

Assume Q = 100000


P = $2,700,000 - 4 × (100,000)  ÷  100,000

= 26


the political people


Fewer workers will be needed.


if productivity increases, production per worker increase. Not very elastic demand means that demand changes only a little with a variation of prices; so if productivity increase, but the demand remains almost the same, less (more efficient) workers will satisfy the demand.

If productivity increases significantly and demand is not very elastic, then the fewer worker will be required.

Further Explanation:

Elastic demand: The demand is termed as elastic when the price of services and goods are sensitive to the quantity demanded.

When productivity increases, it results in an increase in the production of goods. The increased production also increases the supply of goods in the market. Since the demand is less elastic, the quantity demanded will not change significantly. The less demand will force the producers to reduce the supply of the goods. The reduction in supply will result in decreased production. If the level of production is less, then fewer workers will be needed. The supply of the goods affects production levels which in turn affects the requirements for workers. The higher the production levels, the higher the worker requirement or vice versa.

Therefore, if productivity increases significantly and demand is less elastic, then the fewer worker will be required.

Learn more:

1. Demand and type of goods

2. Demand and supply of goods

3. Elasticity of demand

Answer details:

Grade: Middle School

Subject: Economics

Chapter: Elasticity of demand

Keywords: If productivity increases significantly and demand is not very elastic, what is likely to happen, the elasticity of demand, elastic demand .

Letter B.  Fewer workers will be needed.


Increased productivity means increased production per worker. If productivity increases, that is, the worker becomes more productive, there will be more goods produced per worker. In this case, as demand is not very elastic, it means that demand is not very sensitive to falling prices, so fewer workers will be required to supply the same amount of product.

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