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# A firm has two production choices. It could sell Q3 posters at a price

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Manager
Joined: 11 Dec 2010
Posts: 106
WE: Consulting (Consulting)
A firm has two production choices. It could sell Q3 posters at a price  [#permalink]

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10 Apr 2011, 03:02
2
00:00

Difficulty:

75% (hard)

Question Stats:

58% (02:42) correct 42% (03:21) wrong based on 104 sessions

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A firm has two production choices. It could sell Q3 posters at a price of \$3 each. If it does this, its total cost of production will be C3 dollars. Alternately, the firm could sell Q5 posters at \$5 each, with a total cost of C5 dollars and where Q3 > Q5 > C3 > C5 > 0. Which decision will give the firm a larger profit, if profits are defined as total sales income minus total costs?

(1) Q3 is twice Q5 and C3 is twice C5.

(2) Q5 = 6000 and C5 = \$2518

Source - Grockit
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Joined: 16 Nov 2010
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Location: United States (IN)
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Re: A firm has two production choices. It could sell Q3 posters at a price  [#permalink]

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10 Apr 2011, 03:12
1
Profit for Q3 = 3Q3 - C3

Profit for Q5 = 5Q5 - C5

So the question is :

3Q3 - C3 > 5Q5 - C5

(1) says

Q3 = 2Q5 and C3 = 2C5

Difference of two Profits = 6Q5 - 2C5 - (5Q5 - C5) = Q5 - C5 > 0
So Decision 1 is greater.

So (1) is sufficient

(2) says

Q5 = 6000, C5 = 25218

S0 Profit for Decision 2 = 5*6000 - 25218

Now Q3 > Q5 and C3 > C5

So Q3 - Q5 > 0 and C3 - C5 >

We need to know 3Q3 + C3 - 5Q5 - C5 > 0

But we don't know the values of Q3, so not sufficient

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Director
Joined: 01 Feb 2011
Posts: 646
Re: A firm has two production choices. It could sell Q3 posters at a price  [#permalink]

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10 Apr 2011, 10:53
profit 1 3q3-c3

profit 2 5q5-c5

1. Sufficient to answer the question.

2. Not sufficient as we dont know q3 ,c3

Manager
Joined: 04 May 2014
Posts: 158
Location: India
WE: Sales (Mutual Funds and Brokerage)
Re: A firm has two production choices. It could sell Q3 posters at a price  [#permalink]

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31 Jul 2017, 05:57
Q3 > Q5 > C3 > C5 > 0

1) Q3 is twice Q5 and C3 is twice C5
Plugin value starting from the smallest one

Let C5=1
C3=2
Q5=3(Has to be greater than C3 as per the question stem)
Q3=6
Q3-C3=6-2=4
Q5-C5=3-1=2
Hence sufficient.

Statement 2- No info about Q3 and C3. Insufficient
Re: A firm has two production choices. It could sell Q3 posters at a price   [#permalink] 31 Jul 2017, 05:57
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