A Lighthouse That Serves a Dangerous Coastal Area Is Built

question 285

Multiple Choice

A lighthouse that serves a dangerous coastal area is built. The lighthouse cost $2 million to build and serves 200 ships a month. If the shipping in the area increases so that 400 ships pass by a month, the increase in additional costs of providing the light to these new ships is

• A)$2 million.
• B)$10,000.
• C)$5,000.
• D)$0.

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Definitions:

Agency Theory

A principle that describes the relationship between principals (such as shareholders) and agents (such as company executives), focusing on the contracts and costs involved in resolving conflicts of interest.

Principals

Individuals or entities that own, govern, or have significant authority within an organization or operation.

Time Horizon

The length of time over which an investment, project, or policy is contemplated or expected to be effective or profitable.

Creativity

The capacity to generate innovative and useful ideas or solutions.