Question
The Metal Shop produces 1.8 million metal fasteners a year for industrial use. At this level of production, its total fixed costs are $320,000 and
The Metal Shop produces 1.8 million metal fasteners a year for industrial use. At this level of production, its total fixed costs are $320,000 and its total costs are $522,000. The firm can increase its production by 5 percent, without increasing either its total fixed costs or its variable costs per unit. A customer has made a one-time offer for an additional 50,000 units at a price per unit of $0.10. Should the firm sell the additional units at the offered price? Why or why not?
yes; The offered price is less than the marginal cost.
yes; The offered price is equal to the marginal cost.
yes; The offered price is greater than the marginal cost.
no; The offered price is less than the marginal cost.
no; The offered price is greater than the marginal cost.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started