An online streaming company, Netflicks, has invested $100,000 in servers. The resale value of those servers is $70,000 if they never operate, and $0 if they operate. The marginal cost is $0. If they operate, the profit-maximizing price is $10, corresponding to a lifetime quantity of 6,000. O Netflicks should operate, because the marginal revenue is equal to the marginal cost. O Netflicks should operate, because the marginal cost is zero. Netflicks should not operate, because they would be better off by selling their servers. ONetflicks should not operate, because their sunk cost is $100,000. Netflicks should not operate, because the variable profits are less than $100,000.
An online streaming company, Netflicks, has invested $100,000 in servers. The resale value of those servers is $70,000 if they never operate, and $0 if they operate. The marginal cost is $0. If they operate, the profit-maximizing price is $10, corresponding to a lifetime quantity of 6,000. O Netflicks should operate, because the marginal revenue is equal to the marginal cost. O Netflicks should operate, because the marginal cost is zero. Netflicks should not operate, because they would be better off by selling their servers. ONetflicks should not operate, because their sunk cost is $100,000. Netflicks should not operate, because the variable profits are less than $100,000.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![An online streaming company, Netflicks, has invested $100,000 in servers. The resale value of those servers is $70,000 if they never operate, and $0 if they
operate. The marginal cost is $0. If they operate, the profit-maximizing price is $10, corresponding to a lifetime quantity of 6,000.
O Netflicks should operate, because the marginal revenue is equal to the marginal cost.
O Netflicks should operate, because the marginal cost is zero.
O Netflicks should not operate, because they would be better off by selling their servers.
O Netflicks should not operate, because their sunk cost is $100,000.
O Netflicks should not operate, because the variable profits are less than $100,000.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0205915a-7141-4359-946f-77b55f1c0375%2F1c43008f-241b-4e08-a649-f0fd5ad97f0d%2Fa7ovip_processed.jpeg&w=3840&q=75)
Transcribed Image Text:An online streaming company, Netflicks, has invested $100,000 in servers. The resale value of those servers is $70,000 if they never operate, and $0 if they
operate. The marginal cost is $0. If they operate, the profit-maximizing price is $10, corresponding to a lifetime quantity of 6,000.
O Netflicks should operate, because the marginal revenue is equal to the marginal cost.
O Netflicks should operate, because the marginal cost is zero.
O Netflicks should not operate, because they would be better off by selling their servers.
O Netflicks should not operate, because their sunk cost is $100,000.
O Netflicks should not operate, because the variable profits are less than $100,000.
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