Use the Information Below to Answer the Following Questions

question 24

Multiple Choice

Use the information below to answer the following questions.
Fact 11.3.1 A Pepsi, A Business Decision
PepsiCo has done a deal with 300 small Mexican farmers close to their two factories to buy corn at a guaranteed price. PepsiCo saves transportation costs and the use of local farms assures it access to the type of corn best suited to its products and processes. "That gives us great leverage because corn prices don't fluctuate so much, but transportation costs do," said Pedro Padierna, president of PepsiCo in Mexico.
Source: The New York Times, February 21, 2011
-Refer to Fact 11.3.1. The deal with farmers to avoid fluctuations in costs benefits PepsiCo for all the following reasons except

• A)the type of corn it is buying is best suited to its products.
• B)it eliminates variable costs.
• C)transportation costs are lower.
• D)corn costs remain low and stable.
• E)the type of corn it is buying is best suited to its processes.

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Definitions:

Short Run

In economics, a period during which at least one input, like factory size or machinery, is fixed and cannot be changed, as opposed to the long run where all factors can be varied.

Long Run

A period in economic analysis where all inputs can be adjusted and there are no fixed factors of production.

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, reflecting the true profitability of a company.

Short Run

A period in economics during which at least one input is fixed and cannot be changed. It contrasts with the long run, where all inputs can be adjusted.