A pump has failed in a facility that will be completely replaced in three years. A brass pump costing $6,000 installed will last three years. However, a used stainless-steel pump that should last three more years has been sitting in the maintenance shop for a year. The pump cost $13,000 when it was new. The accountants say the pump is now worth $7,000. The maintenance supervisor says that it will cost an extra $500 to reconfigure the pump for the new use, or that he could sell it used (as is) for $4,000. (a) What is the net benefit or net cost of installing the stainless-steel pump? Of installing the brass pump? (b) Which option is better? (c) What is the opportunity cost for this set of options?
A pump has failed in a facility that will be completely replaced in three years. A brass pump costing $6,000 installed will last three years. However, a used stainless-steel pump that should last three more years has been sitting in the maintenance shop for a year. The pump cost $13,000 when it was new. The accountants say the pump is now worth $7,000. The maintenance supervisor says that it will cost an extra $500 to reconfigure the pump for the new use, or that he could sell it used (as is) for $4,000. (a) What is the net benefit or net cost of installing the stainless-steel pump? Of installing the brass pump? (b) Which option is better? (c) What is the opportunity cost for this set of options?
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter7: Proudction Costs
Section: Chapter Questions
Problem 8SQP
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![A pump has failed in a facility that will be completely replaced in three years. A brass pump costing $6,000 installed
will last three years. However, a used stainless-steel pump that should last three more years has been sitting in the
maintenance shop for a year. The pump cost $13,000 when it was new. The accountants
$7,000. The maintenance supervisor says that it will cost an extra $500 to reconfigure the pump for the new use, or
that he could sell it used (as is) for $4,000.
(a) What is the net benefit or net cost of installing the stainless-steel pump? Of installing the brass pump?
(b) Which option is better?
(c) What is the opportunity cost for this set of options?
(d) How much cheaper or more expensive would it be to use the stainless-steel pump rather than a new brass
pump?
say
the
pump is now worth](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9d6e58ec-de62-4767-8b1c-6fdccde3e02e%2F9afb7046-a264-4b5f-86e4-a9e84f73d76e%2F1hr47tp_processed.png&w=3840&q=75)
Transcribed Image Text:A pump has failed in a facility that will be completely replaced in three years. A brass pump costing $6,000 installed
will last three years. However, a used stainless-steel pump that should last three more years has been sitting in the
maintenance shop for a year. The pump cost $13,000 when it was new. The accountants
$7,000. The maintenance supervisor says that it will cost an extra $500 to reconfigure the pump for the new use, or
that he could sell it used (as is) for $4,000.
(a) What is the net benefit or net cost of installing the stainless-steel pump? Of installing the brass pump?
(b) Which option is better?
(c) What is the opportunity cost for this set of options?
(d) How much cheaper or more expensive would it be to use the stainless-steel pump rather than a new brass
pump?
say
the
pump is now worth
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