Given the marginal cost data in the table below for a defender, it is economical to replace the defender in year 1 if EUAC of challenger is $12,500.
$$\begin{array} { | c | c | }
\hline \text { Year } & \text { Margiral cost of defender } \
\hline 1 & \$ 13,000 \
\hline 2 & \$ 12,000 \
\hline 3 & \$ 11,000 \
\hline 4 & \$ 16,000 \
\hline 5 & \$ 15,000 \
\hline
\end{array}$$

Question

Given the marginal cost data in the table below for a defender, it is economical to replace the defender in year 1 if EUAC of challenger is $12,500.
 $$\begin{array} { | c | c | } 
\hline \text { Year } & \text { Margiral cost of defender } \
\hline 1 & \$ 13,000 \
\hline 2 & \$ 12,000 \
\hline 3 & \$ 11,000 \
\hline 4 & \$ 16,000 \
\hline 5 & \$ 15,000 \
\hline
\end{array}$$

Quizplus · Accepted Answer

The defender should be replaced when its marginal cost exceeds the EUAC of the challenger. In year 1, the marginal cost of the defender ($13,000) is higher than the EUAC of the challenger ($12,500), so it is economical to replace the defender in year 1.

Given the Marginal Cost Data in the Table Below for a Defender