11

Multiple Choice

11. Micro Enterprises has the capacity to produce 10,000 widgets a month,and currently makes and sells 9,000 widgets a month.Widgets normally sell for $6 each,and cost an average of $5 to make,including fixed costs.The monthly fixed costs are $18,000.Coyote has offered to buy 1,500 widgets (all or nothing) for $4 each. Should the offer be accepted?

A) No,because it will lose $1 per unit
B) No,because the opportunity costs are less than the gains
C) No, (indifferent or worse) because the opportunity costs equal the gains
D) Yes,because it makes $1 per unit in the short run
E) Unable to determine