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'''Intermediate: 4. Suppose you own a widget factory having fixed costs of $10,000. In addition to the $10,000, you have [[variable cost]]s of $2,500 for each widget you make.  Worse, the factory can make only 3 widgets in an entire year!  Your widget sells for $5,000.  Someone offered to buy your factory for $10,000. Should you sell it?'''

'''Intermediate: 4. Suppose you own a widget factory having fixed costs of $10,000. In addition to the $10,000, you have [[variable cost]]s of $2,500 for each widget you make.  Worse, the factory can make only 3 widgets in an entire year!  Your widget sells for $5,000.  Someone offered to buy your factory for $10,000. Should you sell it?'''

It depends on what portion of the fixed costs are recurring.  There is a profit of $2,500 on every widget that is made, or $7,500 for each year.  If less than $2,500 of the fixed costs are recurring on an annual basis (e.g, rental payments), then you would have an annual profit.

It depends on what portion of the fixed costs are recurring.  There is a profit of $2,500 on every widget that is made, or $7,500 for each year.  If less than $2,500 of the fixed costs are recurring on an annual basis (e.g., rental payments), then you would have an annual profit.

'''5.  One day, you visit Wal-Mart to see if you can sell it some widgets.  Wal-Mart said it has good new and bad news.  The good news is that it wants high volume.  The bad news is that it wants a price so low that your MC=MR for every unit sold to it.  Should you agree?  Explain.'''

'''5.  One day, you visit Wal-Mart to see if you can sell it some widgets.  Wal-Mart said it has good new and bad news.  The good news is that it wants high volume.  The bad news is that it wants a price so low that your MC=MR for every unit sold to it.  Should you agree?  Explain.'''