Happy Bagels sells its bagels for $6 each and the firm has a constant marginal cost of $4 per bagel, which is equal to its (constant) average total cost. If Happy Bagels does not sell a bagel the day it is produced, the bagel is sold as day-old for $2. If Happy Bagels is currently holding 50 bagels in inventory and the probability that Happy Bagels will sell 50 bagels or more is 0.40, which of
the following statements is true?
A) To obtain the profit-maximizing, optimal level of inventory, Happy Bagels needs to double its inventory.
B) To obtain the profit-maximizing, optimal level of inventory, Happy Bagels needs to increase its inventory.
C) To obtain the profit-maximizing, optimal level of inventory, Happy Bagels needs to decrease its inventory.
D) Happy Bagels is holding the profit-maximizing, optimal level of inventory.
C) To obtain the profit-maximizing, optimal level of inventory, Happy Bagels needs to decrease its inventory.
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What factors should be considered in determining whether a firm should sell to buyers in a foreign country by exporting from its home country or by setting up local production in the foreign country to produce the products that are sold to the foreign consumers? When identifying these factors, clearly explain how and why they push the decision toward one or the other of the two available choices.
What will be an ideal response?