Imagine you are running a business that processes horticultural product, and is currently producing 40,000 tonnes of product per year. The average cost of producing 40,000 tonnes is $600 per tonne.   A buyer for a large supermarket chain comes along and offers to buy an extra 10,000 tonnes of your product at a price of $300 per tonne. This price is much less than the average cost of production for the current annual output. With the current production system of the business, the marginal cost per tonne of producing an extra tonne is $200/ton.   1. Would you accept or reject this offer, and why?     2. What principles underlie your reasoning in deciding whether to accept or reject this offer?

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