1. You are serving as the chair for your community’s annual wellness campaign. A key event is the annual Walk 3k, Run 10k, Ride 20k event. The event is staged entirely by volunteers and the goal is to attract community-wide awareness of getting active as a key step to wellness. In other words, the goal is not to raise money, but to prompt awareness. As the chair, you set a financial goal to break even on the one and only cost of the event, a fitness bag with the community seal and the event motto, “I AM ON THE RIGHT TRACK!”
The cost of the bags, which must be ordered in batches of 100, are:
Bags/Participants Fixed Cost Variable Cost Total Cost Marginal Cost
0 $1,700 $ – $1,700
100 $1,700 $500 $2,200 ?
200 $1,700 $1,200 $2,900 ?
300 $1,700 $2,700 $4,400 ?
400 $1,700 $5,200 $6,900 ?
500 $1,700 $9,000 $10,700 ?
600 $1,700 $15,000 $16,700 ?
700 $1,700 $23,800 $25,500 ?
800 $1,700 $36,800 $38,500 ?
900 $1,700 $55,800 $57,500 ?
1000 $1,700 $83,000 $84,700 ?
2. Given the above information on cost, if you charge $15 per entry, what is the breakeven quantity of bags that you should order? At what quantity of bags will profits be maximized?
Please select any/all viable approaches below:
Using Qb = F/(MR – AVC) where Qb is the break even quantity, the event would break even at 283 bags.
O Using the profit-maximizing rule, MR ≥ MC, the quantity of bags that will maximize profits is 200 bags.
O Using the profit-maximizing rule, MR > MC, the quantity of bags that will maximize profits is 300 bags.
O The break even quantity cannot be determined in this case.
3. Your Best Brand Bike Shorts – BBB Shorts have been flying off the shelf. Your chief economist tells you that during the Covid-19 pandemic, “the taste for bicycling has changed. The price elasticity of demand is much more inelastic. The price elasticity of demand has decreased from -5.76 to -2.70.”
Before the campaign, your price was $240 per pair of BBB Shorts. What should the new price be?
Please enter the new price here: $ [a] Show only your answer in the box. Do not include steps in the box and do not add the dollar sign.
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