Suppose XYZ Corp

question 119

Multiple Choice

Suppose XYZ Corp.is a profit-maximizing firm that is producing and selling 1 billion disposable wooden chopsticks per month at a price of $0.04 per unit.Further,suppose market demand for this product is 1.5 billion units per month.What can we conclude about market structure in this case?

• A)This is not a perfectly competitive market because XYZ Corp.is small relative to the size of the industry.
• B)This is not a perfectly competitive market because XYZ Corp.is selling its product at a price that is not equal to marginal cost.
• C)This is a perfectly competitive market because there is freedom of entry and exit in the industry.
• D)This is a perfectly competitive market because the product is homogeneous.
• E)This is not a perfectly competitive market because XYZ Corp.is large relative to the size of the industry.

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Definitions:

Contribution Margin

The amount by which a product's sales exceed its variable costs, contributing towards covering fixed costs and generating profit.

IRR

Internal Rate of Return; a metric used in financial analysis to estimate the profitability of potential investments.

Base-Case

A scenario used as a benchmark in analysis, representing the default or most likely set of assumptions.

Sensitivity Analysis

A technique used to determine how different values of an independent variable will affect a particular dependent variable under a given set of assumptions.