Suppose that you manage a grocery store and you are thinking about stocking a ce

Question

Suppose that you manage a grocery store and you are thinking about stocking a certain type of nutritional supplement. You obtain some data from your purchasing department concerning the costs of buying the supplement from your supplier/wholesaler. Your finance department also factored in opportunity costs from stocking alternative products on the shelves. After putting all your data together, you come up with the following table of costs for stocking up to 8 units of the supplement per day on the shelves:

Explanation / Answer

Since, price is constant it equals Marginal Price.

a)

To max. profit, MR = MC

This happens at 4th unit.

Profit = (9-4.75)*4 = 17

b) Extending credit period to buyers might give an advantage.

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