Tim Marlow, the Owner of the Clock Works, Wanted to Know

question 100

Multiple Choice

Tim Marlow, the owner of The Clock Works, wanted to know how many clocks he must sell in order to cover his fixed cost at a given price.Tim knew that he had a fixed cost of $20,000 for equipment, taxes, and a bank loan.He also had a unit variable cost of $20 per clock for labor, and materials.If the price Tim charges for each of his clocks is $40, what is his break-even point quantity?

• A)10 clocks
• B)100 clocks
• C)1,000 clocks
• D)10,000 clocks
• E)cannot be determined from the information provided

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Definitions:

Consumption Bundle

A collection of goods or services that a consumer selects for purchase, representing a combination of different items that provide utility.

Income

The total money received by an individual or household from various sources, including wages, salaries, benefits, and investments.

Convex Preferences

In consumer theory, these are preferences where blends or combinations of two goods are preferred to extreme allocations, reflecting a desire for balance.

Indifference Curve

A graph representing different bundles of goods between which a consumer is indifferent, showing the combination of two goods that give the same level of satisfaction to the consumer.