Artsy T-Shirts sells 100,000 shirts a year, priced at $14 each. The company can produce any number of shirts at a constant cost of $10 each. It is considering expanding its sales by lowering the price to $12.
What minimum increase in sales would be necessary in order to justify this expansion?
Firms that are successful sometimes take their profitability as a signal that they should expand. Why does this expansion sometimes get them in serious trouble?