The Opportunity Cost of Producing a Component Within a Firm

question 49

Multiple Choice

The opportunity cost of producing a component within a firm is:

• A) The return that could be earned from the best alternative use of the resources
• B) The return that could be earned from the worst alternative use of the resources
• C) The actual cost of making the component
• D) None of these are correct

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Definitions:

No-par Value Stock

Stock issued without a specified face value, leaving the issued price to be determined by the company's board of directors.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, typically with fixed dividends.

Common Stock

Common Stock represents shares in a company that entitle the holder to vote at shareholders' meetings and to receive a part of the company's profits as dividends.

Stated Value Stock

Stated value stock is an issue of shares that does not have a par value but instead has a nominal stated value assigned by the company.