If a Company Has Excess Capacity, the Most It Would

question 3

Multiple Choice

If a company has excess capacity, the most it would pay for buying a product that it currently makes would be the

• A) total cost of producing the product.
• B) market value of the product.
• C) market value less usual markup on the product.
• D) total variable cost of producing the product.

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Definitions:

Limited Resources

A concept in economics that refers to the finite availability of resources such as time, money, and materials, necessitating allocation decisions.

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, indicating the financial success of a business beyond breaking even.

Accounting Costs

The documented expenses and outlays involved in running a business, as recorded in its financial statements.

Economic Costs

The total cost of choosing one action over another, including both explicit costs (direct payments) and implicit costs (opportunity costs).