The Owner of a Mattress Factory Is Concerned About the Quality

question 296

Multiple Choice

The owner of a mattress factory is concerned about the quality of the mattresses coming off the assembly line.Which of the following incentives would most likely increase the quality of the assembly line employees?

• A) a $1.00 per hour raise
• B) 25 cents for each mattress produced
• C) a company meeting on improving performance in which employees actively participate
• D) a detailed memo listing the new rules that employees must follow on the assembly line

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Definitions:

Total Fixed Cost

The sum of all costs that do not change with the level of output or activity over a short period, such as rent, salaries, and equipment maintenance costs.

Average Total Cost

The total cost of production divided by the number of units produced.

Implicit Costs

The opportunity costs of using resources owned by the firm for its project instead of selling or renting them to others.

Fixed Costs

Costs that do not vary with the level of production or output, such as rent, salaries, and insurance.