Profit Maximizing Firms Produce Their Output

question 39

Multiple Choice

Profit maximizing firms produce their output:

• A)to minimize tax payments to government.
• B)to minimize the cost of production.
• C)according to Cobb- Douglas production functions.
• D)to maximize their revenue from sales.

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Definitions:

Variable Cost

Costs that vary directly with the level of production or service delivery.

Fixed Manufacturing Cost

A rephrased definition for Fixed Manufacturing Overhead; these are costs that do not change with the level of manufacturing activity, such as property taxes on a factory.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including utilities, depreciation, and salaries for management.

Fixed Manufacturing Cost

Costs that remain constant regardless of the level of production, such as salaries of permanent employees and depreciation of factory equipment.