solution

An entrepreneur identifies a product that she knows will sell like crazy if she can only figure out a way to bring it to her area. The idea is so fantastic that I can’t tell you what it is, so we will just refer to it as X. The entrepreneur has identified four ways to bring X to the masses; she can import it, she can smuggle it, she can try to produce it on her own, and she can have a local reputable producer make it for her. The fixed and variable costs for each of these alternatives are shown below. What is her best course of action if she believes the demand will be 55,000 units?

Option A: Fixed cost $0, variable cost$30

Option B: Fixed cost $500000, variable cost $10

Option C: Fixed cost $200000 variable cost $15

Option D: Fixed cost $0, variable cost $37

D

B

C

A