Upon Opening a Printing and Copy Shop, a Firm Budgets

question 50

Multiple Choice

Upon opening a printing and copy shop, a firm budgets $40,000 for copy machines and labor. If the price of labor is $5 per hour and the firm can afford to operate its copy machine for 5,000 hours if it hires no labor, the slope of an isocost line when labor is measured on the horizontal axis is

• A) -5/8
• B) -8/5
• C) -1/5
• D) -5
• E) -1/4

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Definitions:

Manufacturing Overhead

All indirect costs associated with the production process, like utilities and salaries for support staff.

Fixed Cost

A type of business expense that does not change with the level of production or sales, including costs like rent, salaries, and insurance premiums.

Variable Cost

Costs that fluctuate directly with changes in production or sales volume.

Product Costs

The costs that are directly associated with the manufacturing of products, including direct labor, materials, and manufacturing overhead.