Which of the Following Explains Most Clearly Why Business Owners

question 37

Multiple Choice

Which of the following explains most clearly why business owners have a strong incentive to strive for operational efficiency?

• A) They recognize that operational efficiency promotes the public interest.
• B) As residual claimants, owners will receive a higher income from increased efficiency.
• C) The owners will be able to keep production costs low by providing free managerial services to the firm.
• D) The owners will be able to gain by paying employees below market wages, which will improve the overall efficiency of the economy.

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Definitions:

Marginal Cost

The increase in total cost that arises from producing one additional unit of a product or service.

Average Total Cost

The total cost of production divided by the number of units produced, which includes both fixed and variable costs.

Total Cost

The complete expense incurred in production, combining both fixed and variable costs.

Wage Rates

The standard amount of compensation given to employees for their services per unit of time or piece of work.