What Is the Fixed-Cost Expenditure for a Firm with a DOL

question 25

Multiple Choice

What is the fixed-cost expenditure for a firm with a DOL of 4.5 that generates pretax profits of $1 million and has $600,000 in depreciation expense?

• A)$1.1 million
• B)$2.1 million
• C)$2.9 million
• D)$3.9 million DOL = 1 +
• 4)5 = 1 +
• 3)5 =
• $3)5 million = fixed costs + $600,000

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Definitions:

Average Total Cost Curve

A graphical representation showing how the average cost per unit of output varies with the level of output.

Profit-Maximizing Quantity

The quantity of output that an entity can produce and sell at the highest profit, considering its costs and market demand.

Long-Run Equilibrium

A state in which all firms in a given industry are making zero economic profit, leading to an optimal allocation of resources given current technology and factor prices.

Selling Price

The amount of money for which a product or service is sold to consumers.