TopKnotch Mfg

question 16

Multiple Choice

TopKnotch Mfg. Co. has a production cost of $280. It sells its product to a wholesaler for $400. The wholesaler then sells the item to retailers for $500 and the retailers sell the item for $1,000. Which of the following is true about this "markup chain?"

• A) The wholesaler's markup is 25 percent.
• B) The manufacturer is taking a markup of 30 percent.
• C) The retailers' markup is 100 percent.
• D) None of these alternatives is true for this markup chain.

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Definitions:

Average Variable Cost

The total variable cost of producing goods divided by the quantity of goods produced.

Law of Diminishing Marginal Returns

A rule of economics that asserts when a single production element is expanded and the rest stay unchanged, there will ultimately be a decline in total output after reaching a specific threshold.

Cost Curves

Graphical representations in economics that show how the costs of production vary with different levels of output.