Assuming Costs Are Represented on the Vertical Axis and Volume

question 55

Multiple Choice

Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis, which of the following costs would be represented by a line that starts at the origin and reaches a maximum value and beyond the point that the line becomes parallel to the horizontal axis?

• A)total direct material costs
• B)a consultant paid £100 per hour with a maximum fee of £2,000
• C)employees who are paid £15 per hour and guaranteed a minimum weekly wage of £300
• D)rent on exhibit space at a convention

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Definitions:

VMPL

The Value of Marginal Product of Labor, which represents the additional revenue generated by employing one more unit of labor.

Profit

The financial gain realized when the amount of revenue gained exceeds the expenses, costs, and taxes needed to sustain the operation.

Marginal Productivity

The additional output that can be produced by adding one more unit of a specific input, keeping all other inputs constant.

Perfectly Competitive

A type of market where numerous small firms compete against each other offering products that are virtually interchangeable and where no single company can dictate the market price.