Suppose That in Horsehead, Massachusetts, the Cost of Operating a Lobster

question 41

Multiple Choice

Suppose that in Horsehead, Massachusetts, the cost of operating a lobster boat is $4,000 per month. Suppose that if x lobster boats operate in the bay, the total monthly revenue from lobster boats in the bay is $1,000(28x - x²) . If there are no restrictions on entry and new boats come into the bay until there is no profit to be made by a new entrant, then the number of boats who enter will be X₁. If the number of boats that operate in the bay is regulated to maximize total profits, the number of boats in the bay will be X₂.

• A) X₁ = 12 and X₂ = 10.
• B) X₁ = 28 and X₂ = 16.
• C) X₁ = 24 and X₂ = 12.
• D) X₁ = 24 and X₂ = 24.
• E) None of the above.

Develop cost formulas for mixed costs.

Interpret the cost behavior of different types of costs in response to changes in activity levels.

Understand the concept of relevant range in cost analysis.

Understand the distinction between job-order costing and process costing and the appropriate contexts for their use.

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