(Answered) This year a competitor has developed a similar toy that has

Economics

Last year, a toy manufacturer introduced a new toy that was a huge success. The company invested $2.5 million for a plastic injection molding machine (which can be sold for $2 million) and $100,000 in plastic injection molds specifically for the toy (not valuable to anyone else). Labor and the cost of materials necessary to make each truck is about $3. This year, a competitor has developed a similar toy that has significantly reduced demand for the toy truck. Now the original manufacturer is deciding whether they should continue production of the toy truck. If the estimated demand is 100,000 trucks, what is the breakeven prices for the toy trucks? Should you shut down?

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