Donder Milling Company Purchases Logs and Mills Them into Various

question 73

Multiple Choice

Donder Milling Company purchases logs and mills them into various grades of lumber. During the sawing and planning process, a considerable amount of sawdust is generated. Currently, Donder sells the sawdust to a particle board manufacturer for $50 per truckload. Donder is considering processing the sawdust into particle board itself. One truckload of sawdust can be made into 20 sheets of particle board selling for $8 per sheet. Further processing costs are $7 per board.
-Refer to the Figure.Should Donder process the sawdust into particle board,and what would be the effect on income?

• A)No, income will decrease by $50 per truckload of sawdust.
• B)No, income will decrease by $30 per truckload of sawdust.
• C)Yes, income will increase by $20 per truckload of sawdust.
• D)Yes, income will increase by $50 per truckload of sawdust.

Explain the impact of economies and diseconomies of scale on firm's cost structures.

Understand the factors contributing to diseconomies of scale within large management structures.

Explain the conditions under which firms experience economies of scale.

Understand the shift in cost curves due to government taxes on producers.

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Definitions:

Producer Surplus

Is the difference between the amount producers are willing to accept for a product or service and the actual amount they receive.

Sellers' Costs

The expenses incurred by sellers in providing goods or services, including production, labor, and materials costs.

Good

A tangible product or item that satisfies some human want or need, which can be transferred or sold from one person to another.

Profits And Losses

A financial metric indicating the positive (profits) or negative (losses) financial outcomes of a business's operations.