If a Firm Sells 100 Units at a Price of $5

question 56

Multiple Choice

If a firm sells 100 units at a price of $5 and each unit costs $3 to produce,its total cost equals

• A)$3
• B)$5
• C)$200
• D)$300
• E)$500

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Definitions:

Financial Leverage

The use of borrowed funds to increase the potential return of an investment, which can also increase the risk of loss.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Average Cost

A method of inventory costing, or determining an investment's cost, by taking the total cost of items and dividing it by the total number of items.

Capital

Refers to the financial resources that businesses use to fund their operations and growth.