Sam Is Offering a New Product Which Has a Variable

question 353

Multiple Choice

Sam is offering a new product which has a variable cost per unit of $26.08 and total fixed costs of $42,714. What is the selling price of this product if the cash break-even quantity is 6,300 units?

• A) $29.47
• B) $29.63
• C) $32.10
• D) $32.86
• E) $33.07

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Definitions:

External Benefits

External benefits refer to the positive effects or advantages that a product or activity imparts on individuals or society who are not directly involved in the production or consumption of the good.

Network Externalities

The effect on a user of a product or service that results from an increase in the number of other users of the same or compatible products or services.

Natural Monopolies

Market conditions where a single firm can supply a good or service more efficiently than any competitor due to economies of scale, hence dominating the market.

Positive Feedback

Put simply, success breeds success, failure breeds failure; the effect is seen with goods that are subject to network externalities.