ou are a minimum-wage worker at a U.S. company that makes cars. Last month’s finance report on your profits and sales is below. This morning, your government announced it would save the American people money on cars by capping the price of the kind of cars you make at $10,000. Some of your co-workers know you are taking this course and want to know what you think will happen. Monthly Financial Report Total Profit Total Monthly Revenue $2,400,000 Total Monthly Costs $2,000,000 Total Monthly Profit $400,000 Revenue Average Price of Cars # of Cars

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Chapter1: Making Economics Decisions
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Answer the questions on the right based on the following scenario:

Car Manufacturer Scenario: You are a minimum-wage worker at a U.S. company that makes cars. Last month’s finance report on your profits and sales is below. This morning, your government announced it would save the American people money on cars by capping the price of the kind of cars you make at $10,000. Some of your co-workers know you are taking this course and want to know what you think will happen.

Monthly Financial Report

Total Profit

Total Monthly Revenue

$2,400,000

Total Monthly Costs

$2,000,000

Total Monthly Profit

$400,000

Revenue

Average Price of Cars

# of Cars Sold

Total Revenue

$12,000

200

$2,400,000

Employee Salaries

 

Hourly Rate

Monthly Pay per Employee

# of Employees

Total Monthly Cost

General Manager

$30/hour

$4,800

1

$4,800

Shift Managers

$15/hour

$2,400

5

$12,000

Assembly-Line Employees

$12/hour

$1,920

25

$48,000

Total Monthly Cost of Salaries

$64,800

a. What would your company’s monthly profits be if they did not make any changes except reducing the price of the car from $12,000 to $10,000?

b. Identify at least one action your company would take.

 

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Car Manufacturer Scenario:

Be specific and explain why you came to that conclusion using the principles of supply and demand.

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