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Assuming that the MR Corporation has an inventory of 200 defective motors costing $450,000 to produce and $150,000 to repair, if the company receives an offer to purchase these motors for $325,000 before repairing them, the company's decision should be to sell the motors at the offered price.
The $450,000 production costs are sunk costs and therefore irrelevant to the decision. The relevant costs are the repair costs of $150,000 compared to the offer to purchase for $325,000. Since the offer is more than the repair costs, the decision should be to sell the motors at the offered price.
Straight Line
In the context of graphs, a linear representation that exhibits a constant rate of change between two variables.
Horizontal Change
A term that does not have a standard definition in economics; it might be a misinterpretation or miscommunication of a concept. NO.
Vertical Change
A movement along the y-axis in a graph, which in economic terms can represent changes in price or quantity depending on the context.
Independent Variable
is a variable in an experiment or study that is manipulated by the researcher to observe its effect on the dependent variable, determining cause-and-effect relationships.
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