Ben Has Been Thinking About Going into Business

question 94

Multiple Choice

Ben has been thinking about going into business. However, he has discounted entering automobile manufacturing because it

• A) requires little skill and knowledge.
• B) is not a part of the production industry.
• C) requires huge investments in machinery and equipment.
• D) is unprofitable.
• E) requires by law a corporate form of business.

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Definitions:

Calls

A financial instrument giving the holder the right, but not the obligation, to buy an asset at a specified price within a specific period.

Period Cost

Costs that are not directly associated with the production of goods and are expensed in the period they are incurred, such as administrative and selling expenses.

Variable Cost

Charges that adjust according to the volume of goods produced or sold, specifically materials and labor costs.

Opportunity Cost

The foregone benefit that could have been achieved from options not chosen when selecting one among several alternatives.