A snowboard company currently hires 10 skilled employees who are paid a weekly wage of $1,000. The cost of capital is $3,000 and it is fixed, which means that it does not vary with output. The company is currently producing 240 snowboards. The company’s cost will be $13,500 if it produces an additional snowboard. A customer is willing to pay $550 for the 241st snowboard. What core principles should be considered in the snowboard company's decision making? (i) Scarcity, Choice and Opportunity Cost (ii) Cost-Benefit analysis (iii) Incentive Principle (iv) Diminishing Returns
A snowboard company currently hires 10 skilled employees who are paid a weekly wage of $1,000. The cost of capital is $3,000 and it is fixed, which means that it does not vary with output. The company is currently producing 240 snowboards. The company’s cost will be $13,500 if it produces an additional snowboard. A customer is willing to pay $550 for the 241st snowboard. What core principles should be considered in the snowboard company's decision making? (i) Scarcity, Choice and Opportunity Cost (ii) Cost-Benefit analysis (iii) Incentive Principle (iv) Diminishing Returns
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter3: Benefits, Costs, And Decisions
Section: Chapter Questions
Problem 3.5IP
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A snowboard company currently hires 10 skilled employees who are paid a weekly wage of $1,000. The cost of capital is $3,000 and it is fixed, which means that it does not vary with output. The company is currently producing 240 snowboards. The company’s cost will be $13,500 if it produces an additional snowboard. A customer is willing to pay $550 for the 241st snowboard.
What core principles should be considered in the snowboard company's decision making?
(i) Scarcity, Choice and
(ii) Cost-Benefit analysis
(iii) Incentive Principle
(iv) Diminishing Returns
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