Bill Operates a Boat Rental Business in a Competitive Industry

question 250

Multiple Choice

Bill operates a boat rental business in a competitive industry. He owns 10 boats and pays $1,000 per month on the loan that he took out to buy them. He rents each boat for $200 per month. The variable cost for each boat rental is $50. In the off season, Bill should

• A)operate his business as long as he rents at least 7 boats per month.
• B)operate his business as long as he rents at least 1 boat per month.
• C)operate his business as long as he rents all 10 boats each month.
• D)raise the price he charges per boat rental.

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Definitions:

Raw Materials

Any materials that go into the final product.

Book Value per Share

The equity available to common shareholders divided by the number of outstanding shares, indicating the value of a company’s equity on a per-share basis.

Market Price

The current price at which an asset or service can be bought or sold in the marketplace.

Common Share

Equity securities that represent ownership in a corporation, giving holders voting rights and a share in the company’s profits through dividends.