Type your question here A domestic shoe company distributes running shoes and te
ID: 1185751 • Letter: T
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A domestic shoe company distributes running shoes and tennis shoes for $ 95.00 per pair. The marginal cost of producing a pair of running shoes is $ 60,00, and the marginal cost of producing a pair of tennis shoes is $ 45.00 A Chinese retailer offers to purchase running shopes for $ 55.00 per pair and tennis shoes for distribution in China. Should the shoe company sell any shoes to the Chinese retailer? <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Explanation / Answer
marginal cost of running shoe = 60
marginal cost of tennis shoe = 45
avg marginal cost = (60+45)/2 = 52.5
now Chinese retailer is offering 55 for shoes then company should sell shoes because price is higher than marginal cost
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