Boney Corporation Processes Sugar Beets That It Purchases from Farmers

question 32

Multiple Choice

Boney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $64 to buy from farmers and $23 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $34 or processed further for $37 to make the end product industrial fiber that is sold for $85. The beet juice can be sold as is for $55 or processed further for $41 to make the end product refined sugar that is sold for $85.What is the financial advantage (disadvantage) for the company from processing one batch of sugar beets into the end products industrial fiber and refined sugar rather than not processing that batch at all?

• A) ($165) per batch
• B) ($4) per batch
• C) $5 per batch
• D) $21 per batch

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Definitions:

Entry And Exit

The ease with which new competitors can enter into an industry and existing ones can leave, influencing the competitive dynamics and profitability of a market.

Economic Profits

Economic profits refer to the excess returns a firm makes above its opportunity costs, factoring in both explicit and implicit costs.

Profit-Maximizing

The process of finding the level of output at which a firm makes the highest profit.

Short Run

A period in which at least one factor of production is fixed and cannot be varied by the firm.