A Product Is Priced to Sell for $12 with Average

question 15

Multiple Choice

A product is priced to sell for $12 with average variable costs of $8. The company expects to earn a profit of $400,000 with its total fixed costs of $120,000. What is the minimum number of units that must be sold in order to reach this target return?

• A) 80,000
• B) 120,000
• C) 130,000
• D) 400,000

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Definitions:

Actual Price Level

The current general price of goods and services in the economy, not adjusted for inflation.

Short-Run Aggregate Supply

The overall quantity of products and services that companies intend to offer for sale within a brief period, based on existing prices.

Aggregate Demand

Overall market demand for goods and services in an economy, determined at a prevailing comprehensive price level for a certain duration.

Equilibrium Output

The level of output where the quantity of goods produced equals the quantity of goods consumed, resulting in market equilibrium.