Mr Capps Recently Built a Dental Floss Factory in Montana

question 59

Multiple Choice

Mr. Capps recently built a dental floss factory in Montana. It cost $500,000 and is expected to last ten years. The plant can only be used to produce dental floss and will have no scrap value. When a recession occurs, the yearly revenue from the plant declines to $35,000, compared to costs of $25,000 just for the variable resources required to produce the current rate of output. Mr. Capps should

• A) shut down since he is experiencing economic losses (in other words, he will not get his $500,000 back).
• B) reduce the price of dental floss if his demand is inelastic in order to increase his revenue.
• C) raise the price of dental floss if his demand is elastic in order to increase his revenue.
• D) continue to operate since he is covering his variable costs and the cost of the plant is a sunk cost.

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Definitions:

Self-reward Programs

Techniques or strategies where individuals give themselves rewards for meeting goals or completing tasks to motivate behavior change.

Imaginal Reinforcers

Cognitive behavioral techniques involving the use of imagined rewards to increase the frequency of desired behaviors.

Material Awards

Physical or tangible rewards given in recognition of achievements or performance, often used as incentives.

Behavior Chain

A sequence of events or actions that are connected and lead to a particular behavior or outcome.