1) A manufacturer of breakfast cereals has the opportunity to purchase barley at $3.00 a bushel for 10,000 bushels, if it also buys 5,000 bushels of wheat at $16.00 per bushel. However, the manufacturer does not use any barley in its products, and currently needs 20,000 bushels of wheat. If the current market price of barley is $3.80 per bushel and that of wheat is $15.80 per bushel, should this opportunity be taken, and why? A) Because the company has no need of barley, the opportunity should not be taken. B) Because the opportunity does not meet the company's need for wheat, the opportunity should not be taken. C) Because the value of the opportunity is positive, the opportunity should be taken. D) Because the value of the opportunity is negative, the opportunity should not be taken.

1) A manufacturer of breakfast cereals has the opportunity to purchase barley at $3.00 a bushel for 10,000 bushels, if it also buys 5,000 bushels of wheat at $16.00 per bushel. However, the manufacturer does not use any barley in its products, and currently needs 20,000 bushels of wheat. If the current market price of barley is $3.80 per bushel and that of wheat is $15.80 per bushel, should this opportunity be taken, and why? A) Because the company has no need of barley, the opportunity should not be taken. B) Because the opportunity does not meet the company's need for wheat, the opportunity should not be taken. C) Because the value of the opportunity is positive, the opportunity should be taken. D) Because the value of the opportunity is negative, the opportunity should not be taken.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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