Question

You have a small decoration business primarily making custom paper mache pinata’s. Monopolistic Competition. Each customer has unique custom order, therefore it is very difficult to figure out the marginal cost of each output. You charge a price of $15 for any small two foot by two foot pinata’s. Without marginal cost, how can you check to see if the small pinata’s were profitable?

Answer 1

1. Checking net-profit margins
2. Calculate gross profit margin because the products sold are physical
3. By analyzing operating expenses