A bagel shop sells fresh baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has 8 dozen bagels left at 6:30 p.m. on a particular day, which of the following alternatives is most attractive?
A)Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen.
B)Lower the price of the remaining bagels, but under no circumstances should the price fall below $1.00 per dozen.
C)Throw the bagels away and produce 8 fewer dozen bagels tomorrow.
D)Starting tomorrow, lower the price on all bagels so they will all be sold earlier in the day.

Question

Quizplus · Accepted Answer

Since the cost of making the bagels is already incurred, selling them at any price above $0 is better than throwing them away, even if the price falls below $1.00 per dozen.

A Bagel Shop Sells Fresh Baked Bagels from 5 A Until