A Manufacturing Firm Is Considering Two Locations for a Plant

question 62

Multiple Choice

A manufacturing firm is considering two locations for a plant to produce a new product. The two locations have fixed and variable costs as follows: $$\begin{array} { l c c } \text { Location } & \mathrm { FC } \text { (annual) } & \mathrm { VC } \text { (per unit) } \\\hline \text { Atlanta } & \$ 80,000 & \$ 20 \\\text { Phoenix } & \$ 140,000 & \$ 16\end{array}$$ At what annual output would the company be indifferent between the two locations?

• A) 60,000 units
• B) 15,000 units
• C) 10,000 units
• D) 20,000 units
• E) 4,000 units

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Definitions:

Price Ceiling

A government-imposed limit on how high a price can be charged for a product, service, or commodity.

Gallon

A unit of measurement for volume, primarily used in the United States, equal to 128 fluid ounces, or approximately 3.785 liters.

Quantity Supplied

Quantity Supplied is the amount of a good or service that producers are willing and able to offer for sale at a particular price over a given period.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price level at a specific time.