Question

Marigold Inc. produces organic cranberry juice from cranberries it farmed. Unfortunately, it has been a bad year for cranberries because of severe cold weather. Marigold has only 9,000 litres of juice. It usually sells 14,400 litres at $3.00 per litre. The variable costs of farming the cranberries are $0.85 per litre. Marigold has loyal customers, but its managers are worried that the company will lose customers if it does not have juice available for sale when people stop by the farm. A neighbour is willing to sell 5,400 litres of extra cranberry juice at $2.95 per litre. (b) Using the general decision rule, what is the most per litre that Marigold's managers would be willing to pay for additional juice? (Round all entries to 2 decimal places, e.g. 1.25.) Managers would be willing to pay up to s

Answer 1

answer is $ 3.00 per litre

The manager is worried about lose his customer. Thus mansger's intention is to meet the demand of the customer and not to make profit. So the maximum amount willing to pay by manager will be equal to selling price to customers by manager

selling price to customers by manager is $ 3.00 per litre

please comment if you have any doubt

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