Use the Following to Answer Question

question 63

Multiple Choice

Use the following to answer question:
-(Table: Cakes) Use Table: Cakes.Pat is opening a bakery to make and sell special birthday cakes.She is trying to decide how many mixers to purchase.Her estimated fixed and average variable costs if she purchases 1,2,or 3 mixers are shown in the table.Assume that average variable costs do not vary with the quantity of output.If Pat purchases 1 mixer,her average total cost _____ in the range of output between 100 and 400 cakes.

• A)increases
• B)decreases
• C)remains the same
• D)can't be calculated

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Definitions:

Flotation Costs

The expenses incurred by a company in issuing new securities, including underwriting, legal, and registration fees.

Cost of Equity

The theoretical compensation a company pays to its equity investors for the risk involved in investing in the firm.

Beta

A measure of the volatility, or systematic risk, of a security or portfolio compared to the market as a whole.

Stock Price

The cost of purchasing a share of a company's stock on the stock market.