Q1. A plant has a capacity of 4100 hydraulic pumps per month. The fixed cost is $504000 per month. The variable cost is $166 per pump, and sales price is $328 per pump (assume that sales equal output volume). What is the breakeven point in number of pumps per month? What percentage reduction will occur in the breakeven point if fixed costs were reduced by 18% and unit variable costs by 6%?
Q2. Merit goods have received considerable attention. Can concerts and other publicly provided services be rationalized using these ideas?