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Managerial Economics 4

Last year a toy manufacturer introduced a new toy truck thatwas a huge success. The company invested $2.5 million for plastic injectionmolding machine. (which could be sold for $2.0 million) and 100000 in plasticinjection molds specifically for the toy (not valuable to anyone else). Laborand cost of material necessary to make each truck is about $3.00. This year acompetitor has developed a similar toy that has significantly reduced demandfor the toy truck. Now the original manufacturer is deciding whether they shouldcontinue production of the toy truck. If the estimated demand is 100000 trucks,what is the breakeven price for the toy trucks? Should you shut down?

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