Lark Art Company Sells Unfinished Wooden Decorations at a Price

question 34

Essay

Lark Art Company sells unfinished wooden decorations at a price of $15.00.The current profit margin is $5.00 per decoration.The company is considering taking individual orders and customizing them for customers.To finish the decoration,the company would have to pay additional labor of $3.00 per unit,additional materials costing an average of $4.00 per unit,and fixed costs would increase by $1,500.If the company estimates that it can sell 600 units for $25.00 per unit each month,should it start taking the orders?

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Definitions:

Commons Dilemma

A situation in shared-resource systems where individual users acting independently according to their own self-interest behave contrary to the common good of all users by depleting or spoiling that resource.

Bystander Effect

The phenomenon where individuals are less likely to offer help to a victim when other people are present.

Kitty Genovese

An American woman whose 1964 murder in New York City became influential in the study of the bystander effect and social psychology.

Prisoner's Dilemma

A scenario in game theory where two individuals acting in their self-interest do not result in the optimal outcome for either party.