A Company Has the Choice of Either Selling 600 Defective

question 81

Multiple Choice

A company has the choice of either selling 600 defective units as scrap or rebuilding them.The company could sell the defective units as they are for $2.00 per unit.Alternatively,it could rebuild them with incremental costs of $0.60 per unit for materials,$1.00 per unit for labor,and $0.80 per unit for overhead,and then sell the rebuilt units for $5.00 each.What should the company do?

• A)Sell the units as scrap.
• B)Rebuild the units.
• C)It does not matter because both alternatives have the same result.
• D)Since both alternatives produce a loss,store the units in hopes of a better price later.
• E)Throw the units away.

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Definitions:

Neoclassical Economists

Economists who focus on how consumers make choices based on their preferences and budgets, and how those choices affect the use of resources and the distribution of goods.

Better Off

A term indicating an improvement in someone's situation or condition, often measured in terms of financial wellbeing, health, or quality of life.

Behavioral Economists

Behavioral economists study how psychological, cognitive, emotional, cultural, and social factors affect economic decisions of individuals and institutions, often challenging the assumption of rational decision-making.

Neoclassical Theories

A broad range of economic theories that emphasize the role of supply and demand in an economy, focusing on the allocation of resources and the distribution of income.