Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 11: Problem 6

An article on fortune.com estimated that the cost of materials in Apple's iPhone 7 with 32 gigabytes of memory was \(\$ 225\). Apple was selling the iPhone 7 for \(\$ 649\). Can we conclude from this information that Apple is making a profit of about \(\$ 424\) per iPhone? Briefly explain.

Short Answer

Expert verified
No, we cannot conclude that Apple is making a profit of about $424 per iPhone simply from this information. This figure only represents the difference between the selling price and the cost of materials, and other factors including labor, marketing, and research costs have not been considered in this exercise.

Step by step solution

01

Determine the Relevant Costs

We know both the cost of materials which is $225 and the selling price which is $649.
02

Calculate the Profit

To calculate the profit per iPhone, subtract the cost of materials from the selling price. So, the estimated profit would be $649 - $225.
03

Interpret the Result

The result obtained in step 2 does not necessarily mean that Apple is making that amount of profit per iPhone. There might be other costs (like labor, marketing, research, etc.) not taken into account in this exercise. This calculation merely provides a rough estimate of the profit per iPhone, based on the given data.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

What is the difference between the average cost of production and the marginal cost of production?

Draw a graph that shows the usual relationship between the marginal product of labor and the average product of labor. Why do the marginal product of labor and the average product of labor curves have the shapes you drew?

What are diseconomies of scale? What is the main reason that a firm eventually encounters diseconomies of scale as it keeps increasing the size of its store or factory?

EOG, a Texas-based producer of oil and gas, is called the "Apple of oil" because of the company's history of developing innovative methods to extract energy from shale rock. Using one of EOG's innovations, called iSteer, the company can navigate through thousands of feet of rock with a drill bit that allows for greater recovery oil and gas than methods the company previously used. Briefly explain why economists would consider EOG's use of iSteer an example of technological change.

One description of the costs of operating a railroad made the following observation: "The fixed ... expenses which attach to the operation of railroads \(\ldots\) are in the nature of a tax upon the business of the road; the smaller the [amount of] business, the larger the tax." Briefly explain why fixed costs are like a tax. In what sense is this tax smaller when the amount of business is larger?
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free