The Table Below Contains Information About a Firm's Marginal Revenue

question 94

Multiple Choice

The table below contains information about a firm's marginal revenue product of capital. Suppose the rental price of capital is $425,000. How many units should the firm hire to maximize profit?

• A) The firm should hire 3,000 units or, if fractional units are possible, less than 4,000 but more than 3,000 units.
• B) The firm should hire 4,000 units or, if fractional units are possible, less than 5,000 but more than 4,000 units.
• C) The firm should hire 5,000 units.
• D) The firm should hire 6,000 units or, if fractional units are possible, less than 7,000 but more than 6,000 units.
• E) The firm should hire 7,000 units or, if fractional units are possible, less than 6,000 but more than 7,000 units.

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Definitions:

Activity-Based Costing

A costing method that assigns overhead and indirect costs to related products and services based on the activities they require.

Material Handling

The movement, protection, storage, and control of materials and products throughout manufacturing, warehousing, distribution, consumption, and disposal.

Activity Cost Pool

A “bucket” in which costs are accumulated that relate to a single activity measure in an activity-based costing system.

Measure Of Activity

A metric used to gauge the level of a specific operation or process over a given time period.