Problem:
The Doodad firm can produce either widgets or gadgets.
- Widgets sell for $5.00. Widgets have a fixed cost of $10,000 and a per unit variable cost of $3.00.
- Gadgets sell for $5.00. Gadgets have a fixed cost of $25,000 and a per unit variable cost of $2.00.
Required:
Question: Calculate the indifference point for widgets and gadgets AND interpret the results.
Note: Explain the solution in detail.