Suppose that in the year 2015, Oceanaire, Inc. planned to produce 525,000 units of its lightweight scuba tanks. Of the 525,000 it planned to produce, a total of 35,000 units would be added to the inventory at its new plant in Arizona. Also assume that these units have been selling at a price of $ 250 each and that the price has been constant over time. Suppose further that this year the firm built a new plant for $ 4 million and acquired $ 2.5 million worth of equipment. It had no other investment projects, and to avoid complications, assume no depreciation.
Now suppose that at the end of the year, Oceanaire had produced 550,000 units but had only sold 500,000 units and that inventories now contained 50,000 units more than they had at the beginning of the year. At $225 each, that means that the firm added $11,250,000 in new inventory.
Oceanaire should produce ___.
(A) more output next year since it needs to add to its unplanned investment.
(B) more output next year since it needs to add to its equipment.
(C) less output next year since it needs to reduce its equipment.
(D) less output next year since it needs to reduce its unplanned investment.
Answers: 2
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Suppose that in the year 2015, Oceanaire, Inc. planned to produce 525,000 units of its lightweight s...
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