The Following Table Gives the Average Total Cost of Production

question 414

Multiple Choice

The following table gives the average total cost of production for various levels of output for a competitive price-taker firm
If the firm's fixed cost of production is $3 and the market price is $10, how many units should the firm produce to maximize its profit?

• A) 1
• B) 2
• C) 3
• D) 4

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Definitions:

Job-Order Costing

A cost accounting system used to accumulate costs per job or order rather than a process, suitable for customized orders.

Cost of Goods Manufactured

The total cost incurred to produce products during a specific period, including materials, labor, and overhead.

T-Account

A graphical representation of a general ledger account, used in accounting to depict the effects of transactions on each account.

Cost of Goods Manufactured

The total production cost of goods completed during a specific period, including labor, materials, and overhead.