Use the Following Information to Answer Questions 7, 8 and 9

question 21

Multiple Choice

Use the following information to answer Questions 7, 8 and 9
A company that produces diet supplements that uses a highly automated packaging process has the following production and revenue alternatives for three products A, B, and C) that are feasible to produce with existing plant and equipment. Total revenue is in thousands of dollars per month. Total cost for the first shift is $200,000 per month - of which $120,000 is labor, $60,000 is other variable costs, and $20,000 is fixed cost. As the number of shifts is increased, fixed cost remains at $20,000 per month while variable costs other than labor remain the same per shift. For the second shift, labor must be paid 1.2 times the amount paid on the first shift. For the third shift, labor must be paid 1.4 times what it receives in the first shift.
-Profit will be maximized at which of the following product combinations and number of shifts?

• A) one shift producing 100% of A
• B) one shift producing 25% of A and 75% of B
• C) two shifts producing 50% of A and 50% of B
• D) two shift producing 75% of A and 25% of B
• E) two shifts producing 100% of B

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Definitions:

Regressive

A term often used in taxation to describe a situation where the tax rate decreases as the taxable amount increases, placing a higher relative burden on lower earners.

Top Income Levels

Refers to the highest segment of earners in an economic distribution, often associated with a significant proportion of the total income of a society.

Progressive

Pertaining to a form of taxation in which the tax rate increases as the taxable amount increases, typically applied to income tax.

Regressive

A term describing a tax system where the tax rate decreases as the taxable amount increases, imposing a greater burden on lower-income earners.