A car assembly company ASSEMCO is legally obligated by a contract to buy 25 engines from...

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Economics

A car assembly company ASSEMCO is legally obligated by acontract to buy 25 engines from ENGCO at the end of two years at aprice of $5000 per engine. Accordingly, ASSEMCO started assemblingcars that Ã–t ENGCO engines. In the second year, due to some eventsin the car manufacturing industry, ENGCO decides to increase theprice of their engines, or otherwise it will go bankrupt. Whatshould the manager of ASSEMCO do in this case? How could thisproblem have been avoided? Did the manager choose the wrong methodof procuring inputs?

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A car assembly company ASEEMCO has a contract to buy 25 engines from ENGCO The situation in the car industry has actually turned unfavorable and ENGCO has raised the rate of its engines since it would deal with personal bankruptcy if it has See Answer

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