Ally Owns a Shoe Store

question 21

Multiple Choice

Ally owns a shoe store. The market wage is $10 per hour, and the cost of capital is $2 per week for every $1000, of capital borrowed. Consider the isocost line associated with spending $8000, per week, and let the y-axis be the amount of capital borrowed in increments of $1000. Which of the following is not true?

• A) If Ally borrows no capital, she can employ 800 hours of work.
• B) If Ally employs no workers, she can borrow $4 million of capital.
• C) If Ally employs 600 hours of work, she can borrow $1 million of capital.
• D) If Ally employs 400 hours of work, she can borrow $3 million of capital.
• E) The slope of the isocost line is −5.

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Definitions:

Selling Price

The price at which a product or service is offered to consumers.

Net Operating Income

The revenue from a company's primary business operations minus operating expenses, excluding taxes and interest.

Units Sold

The quantity of product units that have been sold during a specific period.

Break-even Point

The point at which total costs and total revenues are equal, meaning the business is neither making a profit nor suffering a loss.