If a Firm Has No Extra Capacity and a Customer

question 109

Multiple Choice

If a firm has no extra capacity and a customer asks for a special order, what price is acceptable (assuming there are no relevant qualitative factors) ?

• A) The regular price because this order replaces regular business
• B) Only variable cost
• C) Variable cost plus average fixed cost
• D) Only the average fixed cost

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Definitions:

Simplify

In mathematics, to reduce an expression or equation to its simplest form or most understandable version.

Evaluate

The act of determining the worth of a given expression.

Simplify

The process of reducing an expression to its most basic form or smallest possible components.

Evaluate

Finding out the numerical value associated with an expression.