A game producer must pay an annual lump-sum royalty to the original creators of the game. In the most recent contract, the producer agreed to increase the royalty by $10 million. How should it adjust production and price?
A) It should increase the price.
B) If it produces, it should not adjust production or price.
C) It should check whether it will break even.
D) Both a and b.
E) Both b and c.

Question

Quizplus · Accepted Answer

The producer should check whether it will break even after the royalty increase (C), which affects the cost structure. If production continues, adjustments to production or price may not be necessary if the increased costs can be absorbed or offset by other means, hence (B) is also correct.

A Game Producer Must Pay an Annual Lump-Sum Royalty to the Original