Use the Following to Answer Questions

question 1

Multiple Choice

Use the following to answer questions:
-(Table: Market for Fried Twinkies) Use Table: Market for Fried Twinkies. Suppose the government decides to reduce fried Twinkie consumption as part of a war on obesity. After careful study, the government decides to impose a quota of 5,000 on production of fried Twinkies this year. What price will producers charge if they obey the quota law?

• A) $1.20
• B) $1.30
• C) $1.50
• D) The answer cannot be determined with this information.

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Definitions:

Sunk Cost

Costs that have already been incurred and cannot be recovered or refunded, and should not influence future business decisions.

Average Fixed Cost

The cost incurred for fixed inputs (rent, salaries) divided by the quantity of output produced, which decreases as production increases.

Variable Cost

Costs that vary directly with the level of production or output, such as materials and labor, in contrast to fixed costs.

Total Cost

The complete sum of all expenses incurred by a business or individual in producing a good or service.