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30 Jan 2011, 17:49
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C
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
75%
(hard)
Question Stats:
64% (03:29) correct
36%
(03:19)
wrong
based on 245
sessions
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Date
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Not Attempted Yet
Firm A's revenues are described by the equation Ra = 17.12x and its costs by Ca = 12.87x + 2400.
Firm B's revenues are described by the equation Rb = 13.27x and its costs by Cb = 8.77x + 1500.
(x denotes the quantity of sales).
If A's volume of sales increases from 1000 to 2000 over the same period that B's volume increases from 2000 to 3000, the percent increase in profits for the firm with the biggest dollar increase in profits is
A. 20%
B. 30%
C. 60%
D. 50%
E. 33%
Firm B's revenues are described by the equation Rb = 13.27x and its costs by Cb = 8.77x + 1500.
(x denotes the quantity of sales).
If A's volume of sales increases from 1000 to 2000 over the same period that B's volume increases from 2000 to 3000, the percent increase in profits for the firm with the biggest dollar increase in profits is
A. 20%
B. 30%
C. 60%
D. 50%
E. 33%
31 Jan 2011, 03:29
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Ok, I do not know whether it is exactly what you want to hear but I did it that way: first look at difference between revenue and variable cost => take the bigger one (b) which gives you: 4.5x-1500 just plug in 2000 and 3000. you get 7500 and 12000 (difference 4500). 4500> 0.5*7500 so 60%
took me less than 1 minute, so I do not know whether there is actually a shorter way
took me less than 1 minute, so I do not know whether there is actually a shorter way
31 Jan 2011, 20:25
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bhandariavi
We need to compare profits so find out profit in the two cases:
A: 17.12x - (12.87x + 2400) = 4.25x - 2400
B: 13.27x - (8.77x + 1500) = 4.5x - 1500
In both cases, x changes by 1000 so B will give a higher dollar increase (because 4.5 > 4.25)
% increase in B's profit: \(\frac{4.5*1000}{{4.5*2000 - 1500}} * 100 = 60%\)
