A firm makes a product whose contribution per unit is $2,000 and takes 100 hours to make (machine time). A component of this product has a marginal cost of $400 and takes 10 hours to make (machine time). This component could be purchased from an external supplier. Assuming the firm is working at full capacity, what is the maximum price that the company is willing to pay to buy the component from the external supplier?
A firm makes a product whose contribution per unit is $2,000 and takes 100 hours to make (machine time). A component of this product has a marginal cost of $400 and takes 10 hours to make (machine time). This component could be purchased from an external supplier. Assuming the firm is working at full capacity, what is the maximum price that the company is willing to pay to buy the component from the external supplier?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A firm makes a product whose contribution per unit is $2,000 and takes 100 hours to make (machine time). A component of this product has a marginal cost of $400 and takes 10 hours to make (machine time). This component could be purchased from an external supplier. Assuming the firm is working at full capacity, what is the maximum price that the company is willing to pay to buy the component from the external supplier?
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