Consider a Small Firm That Is Producing Winter Jackets

question 46

Multiple Choice

Consider a small firm that is producing winter jackets.It can lease an additional sewing machine for one month for $1200.With this additional machine,the firm can produce an additional 7 jackets during that time period that it sells for $250 each.Hiring the marginal machine adds ________ to the firm's profit and so it should ________ the machine.

• A)-$1200; not lease
• B)$0; be indifferent as to whether to lease
• C)$1200; lease
• D)$550; lease
• E)$1750; lease

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Definitions:

Annual Interest

The amount of money that is paid in interest on an investment, loan, or savings account over the course of a year.

Maturity

The stage in an entity's life cycle, whether a financial instrument, product, or organism, where growth has stopped and it has reached full development.

Borrower Characteristics

Characteristics that describe individuals or entities seeking loans, including their credit history, income level, and financial stability.

Taxability

The condition of being subject to taxation by governmental authorities.