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An online streaming company, Netflicks, has invested $100,000 in servers. The resale value of those servers is $70,000 if they never operate, and $0 if
An online streaming company, Netflicks, has invested $100,000 in servers. The resale value of those servers is $70,000 if they never operate, and $0 if they operate. The marginal cost is $0. If they operate, the profit-maximizing price is $10, corresponding to a quantity of 6,000. O Netflicks should not operate, because they would be better off by selling their servers. Netflicks should operate, because the marginal cost is zero. Netflicks should not operate, because the variable profits are less than $100,000. O Netflicks should not operate, because their sunk cost is $100,000. O Netflicks should operate, because the marginal revenue is equal to the marginal cost
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