It would cost the town of Irondale $50 million to build a gas powered generator

Question

It would cost the town of Irondale $50 million to build a gas powered generator that would produce a maximum of 5 megawatts of electricity at 15 cents per hour. Another alternative would be for Irondale to build a $100 million coal=fired generator that could produce a maximum of 15 megawatts per hour. Irondale should:

a. Build a coal-fired generator because it's hourly operating costs are much lower.

b. Build the gas-powered generator since it is less expensive.

c. Build the coal-fired generator because, while it would cost twice as much to build, it would produce three times more electricity.

d. Obtain more information before deciding what to do..........I feel this is correct.

Explanation / Answer

Yes, since it has not been mentioned about the hourly operating cost of the coal-fired generator, so we cannot yet decide which option is correct. Now using negetation:

option 'a' : incorrect, since hourly operating cost is not mentioned

option 'b' : incorrect, although initial setup cost of gas powered generator is lower than coal- fired generator but it will produce less electricity than the coal-fired generator

option 'c' : incorrect, we cannot yet decide that the coal-fired generator is better without knowing the the hourly operating cost, selling price and other overhead charges.

So option 'd' correct

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