Brewery is considering two potential production

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Q. A brewery is considering two potential production investments:

Option A costs an initial $2 million as well as will involve constant marginal cost of $5

Option B costs an initial $4 million as well as will involve constant marginal cost of $3

In order to make the computation simple, presume that the annual capital cost is 10% of the total outlay. At which production quantity every year would the brewery be indifferent between these two investment opportunities?

Reference no: EM137529


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