Author Question: A company invested 400,000 in a technology that reduced the overall costs of production by reducing ... (Read 51 times)

CharlieWard · **on:** Jul 1, 2018

A company invested 400,000 in a technology that reduced the overall costs of production by reducing their cost per unit from 2 to 1.85 . Later, a manager has an opportunity to outsource production to another company at a cost per unit of 1.75 . If you are the manager, you
a. should consider the 400,000 as a sunk cost, not relevant to the decision.
b. should reduce his effort by ignoring any new developments and letting the production run as it is.
c. should ignore the 400,000 fixed cost.
d. Both A & C

Question 2

Firms tend to raise the price of their goods after acquiring a firm that sells a substitute because
a. They lose market power
b. There is an increase in the overall demand for their products
c. The bundle has a more elastic demand than individual goods
d. The bundle has a more inelastic demand than individual goods