An Entrepreneur Identifies a Product That She Knows Will Sell

Essay

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. Develop a graph showing the ideal alternative across a range of demand that reflects all decision points.
$$\begin{array} { | l | c | c | c | c | } \hline & \text { Import } & \text { Produce } & \text { Smuggle } & \text { Outsource } \\\hline \text { Fixed Cost } & \$ 25,000 & \$ 500,000 & \$ 200,000 & \$ 0 \\\hline \text { Variable Cost } & \$ 30 & \$ 10 & \$ 15 & \$ 37 \\\hline\end{array}$$