USAutomobile Manufacturers Chose Not to Switch to Producing Subcompact Cars

question 42

Multiple Choice

U.S.automobile manufacturers chose not to switch to producing subcompact cars for which of the following reasons?

• A) They did not perceive the U.S. demand for subcompacts as permanent.
• B) This switch was not economically feasible in the long run.
• C) Government policy prevented them from doing so.
• D) All of the above.

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Definitions:

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit, showing how much each unit contributes to covering fixed costs and earning profit.

Operating Income

The profit earned from a firm's normal core business operations, excluding deductions of interest and taxes.

Fixed Costs

Expenses that do not change in proportion to the volume of goods or services a company produces.

Capacity

The maximum output or producing ability of a plant, machine, or company under normal or specific conditions.