Suppose RioTintoAlcan Is Considering the Construction of a New Aluminum

question 37

Multiple Choice

Suppose RioTintoAlcan is considering the construction of a new aluminum smelter in Northern Quebec,the operation of which requires a great deal of electricity.Suppose also that the price of electricity is predicted to rise significantly in the near future.As a result,the firm decides to build a plant using existing technology that is more expensive but uses less electricity per tonne of aluminum produced.This behaviour is an example of

• A)short-run profit maximization.
• B)short-run cost minimization.
• C)the long-run principle of substitution.
• D)innovation away from changes in factor prices.
• E)long-run economies of scale.

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Definitions:

Warranty Expenses

Costs incurred by a company to repair or replace products under warranty, recognized as a liability when products are sold.

Inventory Purchases

The total cost incurred to buy goods intended for sale during a specific accounting period before any deductions or sales.

Actuarial Estimates

Actuarial estimates are calculations done by actuaries to predict future liabilities, expenses, and life expectancies, often for use in insurance and pension plans.

Other Comprehensive Income

Components of comprehensive income that are excluded from net income, including items such as unrealized gains or losses on foreign investments, pension plan adjustments.