Maxwell Is Trying to Decide Whether to Accept a Salary

question 3

Multiple Choice

Maxwell is trying to decide whether to accept a salary of $60,000 or a salary of $25,000 plus a bonus of 20% of net income after the bonus as a means of allocating profit among the partners. What amount of income would be necessary so that Maxwell would consider the choices to be equal?

• A)$35,000
• B)$85,000
• C)$140,000
• D)$210,000

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Definitions:

Plant Sizes

Refers to the scale or capacity of a manufacturing facility or production unit in terms of its output or operations.

ATC

Abbreviation for Air Traffic Control, responsible for regulating and guiding aircrafts to ensure their safe operation in the sky.

Diseconomies of Scale

The phenomenon where production costs per unit increase as a firm's output expands, typically due to inefficiencies and increased complexity.

Average Total Costs

The total cost of production divided by the quantity of output produced; a measure of cost per unit of output.