From Example 7

question 45

Multiple Choice

From Example 7.2, most pizza restaurants have large fixed costs and relatively low variable costs. What does this tell us about the average variable cost (AVC) of producing pizza?

• A) AVC is relatively low.
• B) AVC is relatively high.
• C) AVC is high for low quantities but declines quickly.
• D) AVC is increasing for all quantity levels.

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Definitions:

Reasonable Price

A price that is fair and equitable, determined by the market or assessed through the terms of a contract or situation.

Contract

A legally binding agreement between two or more parties, typically entailing a promise or set of promises enforceable by law.

Unconscionable Contract

An agreement that is so unfairly one-sided that it is considered oppressive or shocks the conscience of the court.

Article 2A

Pertains to the leasing of goods under the Uniform Commercial Code (UCC) in the United States.