Final answer:
To calculate the WipeOut Ski Company's profit or loss, subtract total costs from total revenues, resulting in a $5 loss. At a glance, average cost compared to selling price can indicate profit or loss status, and whether a marginal unit adds to profits depends on whether its revenue exceeds its marginal cost.
Step-by-step explanation:
The student's question revolves around calculating the profits of the WipeOut Ski Company when selling 5 units at $25 each. To calculate the profit or loss, we must subtract the total costs from the total revenues.
Total revenues are calculated by multiplying the number of units sold (5) by the price per unit ($25), resulting in $125. Total costs for producing 5 units are given as $130. Therefore, the company will experience a loss of $5 ($125 revenue - $130 costs).
To determine whether the company is making or losing money at a glance, you would compare the average cost per unit to the selling price per unit. If the average cost is lower than the price, the company is making a profit; if higher, it is experiencing a loss.
The question about the marginal unit asks if producing one more unit at this level would add to profits. To answer this, one would need to know the additional cost associated with producing one extra unit (marginal cost) and the revenue it would generate. If the revenue exceeds the marginal cost, then the marginal unit is adding to profits.