A Firm's Average Total Cost Is $100, Its Average Variable

question 206

Multiple Choice

A firm's average total cost is $100, its average variable cost is $90, and its total fixed cost is $1,000. Its output is

• A) less than 70 units.
• B) between 70 and 120 units.
• C) between 120 and 170 units.
• D) more than 170 units.

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Definitions:

Capital Lease

A lease agreement that qualifies as a purchase of an asset for accounting purposes, because it substantially transfers all the benefits and risks of ownership to the lessee.

Incremental Borrowing Rate

The interest rate a lessee would have to pay to borrow, over a similar term and with a similar security, the funds needed to obtain an asset lease.

Leased Equipment

Assets obtained by a company through a leasing agreement, allowing the company to use the equipment without owning it.

Annuity Due

An annuity due is a type of annuity payment in which each installment is paid at the beginning of each period, rather than at the end, typically used in leases and loan repayments.