Your firm specializes in recycling used plastics into consumer goods. You have three production opportunities: 1. You can produce plastic utensils for a revenue of $30,000 while production will cost $15,000. 2. Alternatively, you can produce lampshades: you calculate that at the optimal production, you expect to sell 2,000 lampshades every year at $10 each, and your average total cost per lampshade will be $2. 3. You also have the option to shut down your factory and produce nothing at a cost of $1,000 a year. Which opportunity do you choose?
Your firm specializes in recycling used plastics into consumer goods. You have three production opportunities:
1. You can produce plastic utensils for a revenue of $30,000 while production will cost $15,000.
2. Alternatively, you can produce lampshades: you calculate that at the optimal production, you expect to sell 2,000 lampshades every year at $10 each, and your
3. You also have the option to shut down your factory and produce nothing at a cost of $1,000 a year.
4 Instead of working hard, Kendall Square Inc’s manager can shirk and not improve costs. In order to incentivize her hard work, Kendall Square Inc’s shareholders want to give the manager a bonus if they see that variable costs are cut by half.
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