Consider twogoods: peanut butter and jelly.
September 4, 2020
Discuss: Given the current state of the economy, what sort of fiscal-monetary policy mix seems most appropriate to you now?
September 4, 2020

Tiger Beer has a single plant that it built for 100 million dollars in 2010. Each year it has a loan repayment of 6 million to pay off the loan it took out to finance the plant. The plant itself is fairly specialized and has zero scrap value, but it has some equipment that is worth 10 million if the plant is closed and sold off. Each year Tiger Beer enters into a bulk electricity and water contracts for which they pay 2 million upfront for all the electricity and water they want. Their marginal cost, which is mostly labor, maintenance and ingredients (Barley, Hops and Yeast) is 2 per unit.

the question asks at Before the beginning of each production year, what parts of the firm’s fixed costs are sunk? and then it ask how does the answer change if we are in the middle of a production year? I am not sure the difference or how the answers would change.

KM
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