A Swim Club Is Designing a New Pool to Replace

question 38

Essay

A swim club is designing a new pool to replace its old pool.The new pool would need to last for 10 years since the club is planning on relocating after 10 years.A concrete shell would cost $100,000 and last for all 10 years.Another option is to install a vinyl liner that would cost only $75,000 to install.However,the vinyl is not guaranteed to last for all 10 years,and it has a 33% chance of breaking down.Repair of the vinyl would cost $40,000 and would extend the life of the vinyl liner to the 10-year mark.If both options are acceptable to the swim club,which one minimizes their cost?

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Definitions:

Quantity Demanded

The entire quantity of a product or service that buyers are ready and capable of buying at a certain price point.

Price

The amount of money required to purchase a good or service, determined by various factors including supply, demand, production cost, and competition.

Total Revenue

The total amount of money a firm receives from sales of its goods or services.

Price Elasticity

A measure of how the quantity demanded of a good or service changes in response to a change in its price.