Suppose That in Enigma, Ohio, Klutzes Have a Productivity of $1,000

question 19

Multiple Choice

Suppose that in Enigma, Ohio, klutzes have a productivity of $1,000 and kandos have a productivity of $5,000 per month. You can't tell klutzes from kandos by looking at them or asking them, and it is too expensive to monitor individual productivity. Kandos, however, have more patience than klutzes. Listening to an hour of dull lectures is as bad as losing $250 for a klutz and $100 for a kando. There will be a separating equilibrium in which anybody who attends a course of H hours of lectures is paid $5,000 per month and anybody who does not is paid $1,000 per month

• A) if 16 < H < 80.
• B) if 16 < H < 40.
• C) only in the limit as H approaches infinity.
• D) for all positive values of H.
• E) if 14 < H < 35.

Grasp the concept of sunk costs and their impact on business decisions.

Understand the principles behind the Third Industrial Revolution and its potential effects on production and transportation costs.

Comprehend how additive manufacturing (3-D printing) affects economies of scale, production costs, and manufacturing industry dynamics.

Differentiate between explicit costs, implicit costs, and the importance of including both in economic cost calculations.

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Definitions:

Actual Sales Volume

The real number of units sold or services provided by a business during a specific period, as opposed to forecasted or planned sales volumes.

Budgeted Contribution Margin

The anticipated difference between sales revenue and variable costs in a budget period.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the standard cost of variable overhead allotted for the actual production.

Indirect Materials

Materials used in the production process that are not directly part of the final product, such as lubricants for machines.