The Relationship Between Labor Usage and Output at the Local

question 8

Multiple Choice

The relationship between labor usage and output at the local coffee shop is summarized in the table below.The price of a cup of espresso is $1.25 and no other inputs are required. $\begin{array}{cc}\begin{array}{c}\text { Labor } \\ \underline {\text { Input }}\end{array} & \begin{array}{c}\text { Cups of } \\ \underline {\text { espresso }}\end{array} \\ 0 & \text { 0 } \\1 & 25 \\2 & 45 \\3 & 60 \\4 & 70 \\5 & 75\end{array}$
The most the coffee shop would pay the third worker is _______.

• A) $75
• B) $60
• C) $18.75
• D) $15

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Definitions:

Traceable Fixed Expense

A fixed cost that can be directly linked to a specific segment or department within a company.

Net Operating Income

Net operating income reflects a company’s financial performance by showing profit calculated from its core business operations, excluding taxes and interest expenses.

Price Reduction

A decrease in the selling price of a product or service, often used as a strategy to increase demand or sales volume.

Traceable Fixed Expense

A fixed cost that can be directly associated with a specific business segment or area, and which would disappear if the segment was eliminated.