A Firm Is Pondering the Introduction of a New Good

question 26

Multiple Choice

A firm is pondering the introduction of a new good with a profit contribution of $70 per unit. Each unit of the good uses 2 units of input A and 3 units of input B. The shadow price of A is $10, and the shadow price of input B is $15. Which of the following statements is true?

• A) The firm should produce the new good.
• B) The opportunity cost of producing the new good is $75.
• C) The firm should not produce the new good.
• D) Producing the new good will earn a profit of $10.
• E) Producing the new good will earn a loss of $5.

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Definitions:

Center Line

In statistical process control charts, this is the line that represents the average or mean of the data points being monitored.

Upper Specification Limit

The maximum acceptable value for a measurable parameter of a product, beyond which quality is deemed unacceptable.

Transaction Time

The amount of time it takes to complete a particular transaction, often used in computing and financial contexts.

Teller Windows

Service points in a bank where customers interact with tellers to conduct transactions, such as deposits, withdrawals, and account inquiries.