Assume a Product Costs $5

question 95

Multiple Choice

Assume a product costs $5.The variable cost per unit is currently $4,and the fixed cost is $25,000.If the company can alter its production method such that the variable costs fall to $3.50 and the fixed costs rise to $30,000,what will happen to the breakeven point?

• A)It will rise and fall later.
• B)It will rise.
• C)It will remain the same.
• D)It will fall.

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Definitions:

Principal-Agent Problem

At a firm, a conflict of interest that occurs when agents (workers or managers) pursue their own objectives to the detriment of the principals’ (stockholders’) goals. In public choice theory, a conflict of interest that arises when elected officials (who are the agents of the people) pursue policies that are in their own interests rather than policies that would be in the better interests of the public (the principals).

Private Sector

The private sector encompasses businesses and entities that are not owned or operated by the government, operating primarily for profit.

Political Decision Making

The process by which public policies are formulated and decided upon by individuals and groups within governmental systems.

Free-Rider Problem

A situation in which individuals benefit from resources, goods, or services without paying for the cost of the benefit, leading to underprovision of those goods or services.