A company builds a model X device. They recently discontinued the model but have detailed cost data indicating that the average cost of production were $8000 per unit. They have 5000 units left in inventory. At a recent marketing meeting two important officials had an argument on what to do with the unsold devices. The relevant quotes are as follows

Official #1: "We have got to clear the inventory . Even though we can't engage in price discrimination, we should just cut the price to sell every one."

Official #2: "Are you INSANE? We can't charge less than average costs or we'll lose money."

They may both be wrong. Explain. (Assume the official is correct about price discrimination -that the company can only set a single price.)

Explain