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Wine Balloon

by Charity-Joy Acchiardo

Students often find production and costs mind numbing. This clip helps connect some of these concepts to the real world. “Wine Balloon,” owned by Eric Corti, produces a wine-preserving product. The product currently sells for $22 and costs $6.50/unit when production is at 700 units. The sharks advise that the potential to cut costs are huge and hence increase revenue. If he produces 100,000 production cost per unit will fall to $2.50. That would be a $4/unit savings! This nicely illustrates economies of scale. Students can be asked to calculate total costs using the average cost formula for both low and high production levels. Other exercises include drawing short and long run output expansion average costs curves and average fixed costs curves. This clip is part of a collaborative research project by Charity-Joy Acchiardo, Abdullah Al-Bahrani, Darshak Patel, and Brandon Sheridan.

Ballooning Costs

The owner of wine balloon talks marginal, average, and total costs. Shark Tank season 3, episode 11

from Shark Tank (2011)
Creator: Mark Burnett
Distributor: ABC
Posted by Charity-Joy Acchiardo