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Hi, i would like to ask about the question in Kaplan Kit from question JEWEL (JUNE 2016) :
3. The following statements have been made about the tabular method used to establish an optimum price: Which of the following statement(s) regarding Jewel Co’s fixed costs is/are correct?
(1) With the tabular method, there must be a consistent relationship between price (P) and demand (Q), as well as a close relationship between demand (Q) and marginal costs (MC).
(2) The tabular method is only suitable for companies operating in a monopolyThe answer is 2 only.
Therefore, my question is, is it correct if i assumed that the tabular method is only for monopoly while the equation method is suitable for other than monopoly business ?Thank you sir 🙂
Kaplan have made up this part of the question themselves (the original exam question only had the calculation of how many batches they should import and sell, and then asked to explain why they could not use the algebraic method).
If you have copied the question correctly, then it makes no sense at all.
The question refers to statements about fixed costs but the statements have nothing to do with fixed costs.
Ignoring that, statement 1 is not true – the figures in the original exam question (which I guess is another part of the Kaplan question) do not have a consistent relationship between price and demand.
Statement 2 is true for both the tabular and the algebraic methods.
Hi Sir, I like to ask you some questions from this question and as searched I see 2 previous questions so that I am referencing here thinking that I you can remember it.
1. In Kaplan book when answering this question said that is it is impossible to use algebraic method for this question. Is it true? And why not as I can have all the informations that will be given if algebraic method should be used.
2. If the fixed costs of the problem are stepped cost, algebraic method cannotbe used, one the comments in the answer of the question. Is it correct?
I do not have the Kaplan books (only the BPP Revision Kit). I do have the original exam question, although Kaplan has obviously amended it.
1 In the original exam question, the selling price per unit is not changing linearly with the number of units (it is falling by $2 per unit initially but then by $3 per unit and then by $1 per unit). To solve algebraically it needs the price demand relationship to be linear.
2 Yes – that is correct 🙂
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