Concrete Corporation Has Two Producing Centers, Contractor and Retailer

question 65

Multiple Choice

Concrete Corporation has two producing centers, Contractor and Retailer. The Contractor Division has a variable cost of $12 for its products and a total fixed cost of $120,000. The Contractor Division also has idle capacity for up to 50,000 units per month. The Retailer Division would like to purchase 20,000 units of the Contractor Division's products per month but is unable to convince the Contractor Division to transfer units to the Retailer Division at $16 per unit. The Contractor Division has consistently argued that the market price of $20 is nonnegotiable. What is The Contractor Division's opportunity cost of not transferring units to the Retailer Division?

• A) $20.
• B) $12.
• C) $8.
• D) $4.

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Definitions:

Deposits

In banking, deposits refer to funds placed into an account which can be withdrawn by the account holder, often used for saving or transactional purposes.

Federal Reserve Notes

The official currency issued by the Federal Reserve System, constituting the primary form of paper money in the United States.

Federal Reserve System

The chief banking authority in the United States, tasked with the formulation of monetary policy and the oversight of banking institutions.

Deposit Insurance

Deposit insurance is a financial safeguard that protects depositors’ money in the event of a bank failure, guaranteeing a certain amount of an individual's deposits in member banks.