Your insurance firm processes claims through its two facilities: facility A and facility B. Each month, facility A handles 9,000 claims and incurs in $108,000 fixed costs and $153,000 in variable costs. Each month, facility B handles 2,000 and incurs $156,000 in fixed costs and $28,000 in variable costs. Hint: Be careful not to commit the sunk-cost fallacy in your analysis. If you anticipate a moderate decrease in the number of claims, you should lay off workers in facility A or B in order to decrease costs.
Your insurance firm processes claims through its two facilities: facility A and facility B. Each month, facility A handles 9,000 claims and incurs in $108,000 fixed costs and $153,000 in variable costs. Each month, facility B handles 2,000 and incurs $156,000 in fixed costs and $28,000 in variable costs. Hint: Be careful not to commit the sunk-cost fallacy in your analysis. If you anticipate a moderate decrease in the number of claims, you should lay off workers in facility A or B in order to decrease costs.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Your insurance firm processes claims through its two facilities: facility A and facility B. Each month, facility A handles 9,000 claims and incurs in $108,000 fixed costs and $153,000 in variable costs. Each month, facility B handles 2,000 and incurs $156,000 in fixed costs and $28,000 in variable costs.
Hint: Be careful not to commit the sunk-cost fallacy in your analysis.
If you anticipate a moderate decrease in the number of claims, you should lay off workers in facility A or B in order to decrease costs.
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