A Company Is Debating Whether to Change Its Cost Structure

question 101

Multiple Choice

A company is debating whether to change its cost structure so that variable costs increase from $4 per unit to $5 per unit but fixed costs decrease from $400,000 to $300,000.If it were to implement the change at its current production level of 100,000,profit would not change.What would happen to the company's profit if the change were implemented and production increased?

• A)It will stay the same.
• B)It will increase.
• C)It will decrease.
• D)It could increase or decrease.

---

Definitions:

Equilibrium

A state in which opposing forces or influences are balanced so that no changes occur, or in a chemical context, when the rate of the forward reaction equals the rate of the backward reaction.

Energy of Activation

The minimum amount of energy that reacting species must possess in order to undergo a specified chemical reaction.

Equilibrium

A state in which the forward and reverse reactions occur at equal rates in a chemical reaction, resulting in no net change in the concentration of reactants and products.

Dynamic Equilibrium

Dynamic equilibrium occurs when the rate of forward reaction equals the rate of the reverse reaction in a chemical system, resulting in the concentrations of reactants and products remaining constant over time.