If a Company Has Excess Capacity,the Most It Should Be

question 96

Multiple Choice

If a company has excess capacity,the most it should be willing to pay for a part for a product that it currently makes would be the ________.

• A)total costs of producing the part
• B)total variable costs of producing the part
• C)total fixed costs that can be avoided by buying the part
• D)total variable costs of producing the part plus total fixed costs that can be avoided by buying the part

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Definitions:

Socially-Optimal Quantity

The level of production or consumption of a good that leads to the maximum welfare for society, considering both benefits and costs.

Market-Equilibrium

A state where the quantity of goods supplied equals the quantity of goods demanded, resulting in a stable price.

Negative Externality

A cost that is suffered by a third party due to an economic transaction that they were not involved in.

Well-Being

The state of being comfortable, healthy, or happy, reflecting the overall quality of a person's life.