Suppose Two Owners of a Store Agree to Split the Profit

question 86

Multiple Choice

Suppose two owners of a store agree to split the profit equally regardless of the number of hours each spends working at the store.As a result,

• A) production efficiency is achieved.
• B) each enjoys only half the marginal benefit of an additional hour working in the store.
• C) one will work all of the time while the other works zero hours.
• D) each will work as many hours as if he or she were the sole owner.

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Definitions:

Planning Budget

A budget prepared for a specific level of activity, used as a tool for comparing actual results to see if plans and objectives are being met.

Fixed Cost

Expenses that do not change in relation to the level of goods or services produced within a certain range of activity.

Static Budget

A static budget is a fixed budget created for a specific level of activity and does not change with the actual level of activity, often used for planning purposes.

Guest-Days

A metric used in the hospitality industry, calculating the total number of guests multiplied by the number of days they stayed.