Question
Susan has just introduced a new technology for harvesting grapes on her vineyard. The technology has much higher fixed costs, but lower variable costs, than
Susan has just introduced a new technology for harvesting grapes on her vineyard. The technology has much higher fixed costs, but lower variable costs, than the technology she previously used. At the same time, Susan has bought her neighbor's vineyard that will allow her to double her vineyard size and quantity of grapes produced. Prior to introducing the new technology, it is known that Susan was making zero economic profits. Has Susan made a bad decision in introducing the new technology? She was only just breaking even before buying the new technology, and now with a much higher level of fixed costs, she may make a loss. Do you agree with her decision or not? Explain in words.
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