Refer to the Following Scenario to Answer the Questions That

question 109

Multiple Choice

Refer to the following scenario to answer the questions that follow.
Five fishermen live in a village and have no other employment or income-earning possibilities besides fishing. They each own a boat that is suitable for fishing but does not have any resale value. Fish are worth $5 per pound, and the marginal cost of operating the boat is $500 per month. They all fish a river next to the village. According to the following schedule, they have determined that, when there are more of them out on the river fishing, they each catch fewer fish per month.

-What is the optimal number of boats that should operate?

• A) 1
• B) 2
• C) 3
• D) 4
• E) 5

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Definitions:

Sales

The activities involved in selling products or services, including marketing, negotiation, and transaction processes.

Desired Profit

The amount of net income that a company aims to achieve within a specific period.

Contribution Margin Ratio

The contribution margin ratio is a financial metric that measures the proportion of revenue that exceeds total variable costs, indicating how much of each sale contributes to covering fixed costs.

Profit-Volume Ratio

A financial tool used to analyze the relationship between profit and sales volume, showing the impact of sales changes on profits.