Cotton Corp

question 19

Multiple Choice

Cotton Corp.currently makes 10,000 subcomponents a year in one of its factories.The unit costs to produce are: An outside supplier has offered to provide Cotton Corp.with the 10,000 subcomponents at an $84.50 per unit price.Fixed overhead is not avoidable.What is the maximum price Cotton Corp.should pay the outside supplier?

• A)$65.00
• B)$84.50
• C)$91.00
• D)$58.50

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Definitions:

Scarcity

A fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.

Decision-making Processes

The steps involved in choosing among alternatives to address a problem or capitalize on an opportunity.

Capitalism

An economic system characterized by private or corporate ownership of capital goods, investments dictated by private decision, and prices, production, and the distribution of goods determined mainly by competition in a free market.

Marginal Cost

The cost of producing one additional unit of a good or service, which can change depending on the level of production.