The Bumpy Ride Suspension company makes springs for bicycle seats. Currently the springs sell for $5 each. Being profit maximizers, the company makes just enough springs so that the marginal cost of the last spring produced is $5 . Their average total
cost at that output is $3.50 . If they currently produce 1,000 springs and the market price falls by $1, approximately how much profit will be lost?
a. all of the profit will be lost
b. profit will fall by $1 per spring
c. there will be no loss of profit
d. more than $1,000 but less than $1,500
e. less than $1,000
Answer: E
Economics
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