A Firm with $600,000 of Fixed Costs and $200,000 of Depreciation

question 21

Multiple Choice

A firm with $600,000 of fixed costs and $200,000 of depreciation is expected to produce $225,000 in profits. What is its DOL?

• A) 3.56
• B) 3.67
• C) 4.56
• D)4.67

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Definitions:

Production

The process of creating goods or services by combining various inputs like labor, materials, and technology.

Total Revenue

The total income a firm receives from selling its products or services, calculated by multiplying the price per unit by the number of units sold.

Marginal Cost

Is the cost of producing one additional unit of a good or service.

Least-cost Combination

An optimal mix of inputs that minimizes the cost of production while yielding a given level of output.