Darlene Runs a Fruit and Vegetable Stand in a Medium-Sized

question 108

Multiple Choice

Darlene runs a fruit and vegetable stand in a medium-sized community where there are many such stands.Her weekly total revenue equals $3,500.Her weekly total cost of running the stand equals $3,500,consisting of $2,500 of variable costs and $1,000 of fixed costs.An economist would likely advise Darlene to:

• A) shut down as quickly as possible because the stand is generating losses.
• B) keep the stand open because it is generating a normal profit.
• C) keep the stand open for a while longer because she is covering all of her variable costs and some of her fixed costs.
• D) keep the stand open for a while longer because she is covering all of her fixed costs and some of her variable costs.

Evaluate make-or-buy decisions considering opportunity costs and total cost implications.

Assess the relevance of specific costs and revenue factors in segment elimination and make-or-buy decisions.

Calculate cash payback period and its importance in assessing investment opportunities.

Estimate internal and annual rate of return to evaluate the profitability of investments.

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Definitions:

Sensory Adaptation

The process by which sensory receptors change their sensitivity to a stimulus over time, often resulting in a decrease in sensitivity to a constant stimulus.

Sensory Deprivation

A condition in which an individual receives significantly reduced sensory input, which can lead to various cognitive and psychological effects.

Saturation

In color theory, saturation refers to the intensity of a color, how pure it is in comparison to gray. In a broader sense, it can also refer to the point at which a thing is unable to absorb or dissolve any more of something.

Colorfulness

The degree to which a visual stimulus is perceived as vivid or saturated, as opposed to dull or washed out.