A brewery is considering two potential production investments:

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

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

In order to make the calculations simple, assume that the annual capital cost is 10% of the total investment. At what production quantity per year would the brewery be indifferent between these two investment opportunities?

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

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

In order to make the calculations simple, assume that the annual capital cost is 10% of the total investment. At what production quantity per year would the brewery be indifferent between these two investment opportunities?

## This question was asked on Jan 08, 2013.

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