Meson Production Is a Price-Taker

question 133

Multiple Choice

Meson Production is a price-taker. They produce large spools of electrical wire in a highly competitive market, and so they practice target pricing. The current market price is $800 per unit. The company has $3,000,000 in assets and shareholders expect a return of 6% on assets. The company provides the following information: Currently the cost structure is such that the company cannot achieve its profit objective and must cut costs. If fixed costs cannot be reduced, how much reduction in variable cost per unit will be needed to hit the profit target?

• A)reduction in variable cost per unit by $120
• B)reduction in variable cost per unit by $1.80
• C)reduction in variable cost per unit by $20.30
• D)reduction in variable cost per unit by $21.80

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Definitions:

Government Service

A sector that encompasses various activities, services, and operations conducted by the government to serve the public and implement policies.

Invisible Hand

A term coined by Adam Smith to describe the self-regulating nature of the marketplace, where individual self-interests unintentionally benefit society as a whole.

Budgets

Financial plans detailing projected income and expenses over a specific period.

Public-sector Managers

Individuals responsible for directing, controlling, and overseeing entities in the government segment that provide public services.