Thomas Edison Once Complained That He Was Not Making a Profit

question 68

Multiple Choice

Thomas Edison once complained that he was not making a profit selling light bulbs because his plants were operating 25 percent below capacity.He estimated that he could increase output 25 percent with a 2 percent increase in the cost of production.He sold the 25 percent on the foreign market at a price below what he called the "cost of production." We can deduce that Edison really meant

• A)Marginal cost was below average cost but less than marginal revenue.
• B)Average cost exceeded variable cost, which exceeded marginal revenue.
• C)Variable cost exceeded fixed cost but was less than marginal revenue.
• D)Marginal cost was above average cost but greater than marginal revenue.

---

Definitions:

Discount Rate

The interest rate used to discount future cash flows of a project or investment to their present value, reflecting the opportunity cost of capital.

Annual Net Cash Inflows

The total cash inflows minus the cash outflows for a business within a one-year period.

Useful Life

The estimated period over which an asset is expected to be usable by a business.

Purchase Machinery

The acquisition of machines or equipment for the production of goods or services.