Santorino Company Produces Two Models of a Component, Model K-3

question 40

Multiple Choice

Santorino Company produces two models of a component, Model K-3 and Model P-4.The unit contribution margin for Model K-3 is $6; the unit contribution margin for Model P-4 is $14.Each model must spend time on a special machine.The firm owns two machines that together provide 4,000 hours of machine time per year.Model K-3 requires 15 minutes of machine time; Model P-4 requires 30 minutes of machine time.
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Now suppose that Santorino Company can sell only 5,500 units of each model.How many units of Model P-4 should be produced?

• A) 5,500
• B) 5,000
• C) 1,250
• D) 2,750
• E) 1,375

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Definitions:

Simultaneous Game

A strategic game where all players make their decisions at the same time, often used in the context of game theory to analyze competitive situations.

Shoplifter

An individual who steals goods from a retail establishment.

Simultaneous Game

A game theory concept where players choose their strategies and make their moves at the same time, without knowledge of the others' choices.

Nash Equilibrium

A concept in game theory where no player can benefit by changing strategies while the other players keep theirs unchanged; it represents a state of mutual best responses.