This Figure Shows the Long-Run Average Total Cost Curve for a Firm

question 22

Multiple Choice

This figure shows the long-run average total cost curve for a firm that produces basketballs, along with four short-run average total cost curves. Each of the short-run average total cost curves corresponds to a different plant size. SRATC₁ corresponds to Plant size 1, SRATC₂ corresponds to Plant size 2, and so forth.
FIGURE 7-5

-Refer to Figure 7-5. What is the total cost of producing 1500 basketballs per week, assuming the firm uses the optimal plant size?

• A) $1500
• B) $15 000
• C) $22 500
• D) $36 000

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Definitions:

Materials Price Variance

Difference between the actual cost of material and the standard cost multiplied by the amount of material purchased.

Cash Account

An account reflecting the amount of cash a company or individual has available.

Work in Process Inventory

Items that are partially completed during manufacturing, which are not yet ready for sale.

Direct Labor Costs

Costs that can be directly attributed to the production of goods or services, such as wages paid to workers manufacturing a product.