Walnut Has Received a Special Order for 2,000 Units of Its

question 69

Multiple Choice

Walnut has received a special order for 2,000 units of its product at a special price of $270. The product normally sells for $360 and has the following manufacturing costs: Walnut is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Walnut accepts the order, what effect will the order have on the company's short-term profit?

• A) $108,000 decrease
• B) $108,000 increase
• C) $180,000 decrease
• D) zero

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Definitions:

Low-productivity Workers

Employees who generate less output per unit of input compared to others, often leading to less efficiency within an organization.

Moral Hazard

The situation where one party is more likely to take risks because another party bears the cost of those risks.

Adverse Selection

A situation where asymmetric information results in high-risk individuals being more likely to participate in a contract or agreement, potentially leading to market inefficiency.

Life Insurance

A contract between an insurer and a policyholder where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person.