ABC Corporation Would Like to Evaluate Three Production Processes (A,B,and

question 25

Multiple Choice

ABC Corporation would like to evaluate three production processes (A,B,and C) to accommodate the changes in demand for its products.The fixed and variable cost per unit are tabled here.Determine the process to be selected when the production volume is 3,000 units. $$\begin{array} { | l | l | l | } \hline \text { Process } & \begin{array} { l } \text { Fxed } \\\text { Cost }\end{array} & \begin{array} { l } \text { Variable Cost per } \\\text { Unit }\end{array} \\\hline \mathrm { A } & \$ 30,000 & \$ 40 \\\hline \mathrm { B } & \$ 40,000 & \$ 30 \\\hline \mathrm { C } & \$ 80,000 & \$ 20 \\\hline\end{array}$$

• A)Process A
• B)Process B
• C)Process C
• D)cannot be determined

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Definitions:

Market Equilibrium

The state in which the supply and demand for a good or service are balanced, leading to a stable price.

Consumer Surplus

The variance between the total price consumers are ready and able to fork over for a good or service and the sum they ultimately pay.

Deadweight Loss

A loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is not achievable.

Consumer Surplus

The difference between the total amount that consumers are willing to pay for a good or service and the total amount they actually do pay.