A Small Business Produces a Single Product and Reports the Following

question 169

Multiple Choice

A small business produces a single product and reports the following data: $$\begin{array} { l c } \text { Price } & \$ 8.00 \text { per unit } \\\text { Variable cost } & \$ 5.00 \text { per unit } \\\text { Fixed cost } & \$ 21,000 \text { per month } \\\text { Volume } & 10,000 \text { per month }\end{array}$$ If the company reduces its price to $7.50, it believes that the volume will go up to 11,000 units. How would this change affect operating income?

• A) It will go up by $2,500.
• B) It will go up by $9,000.
• C) It will go down by $2,500.
• D) It will go down by $9,000.

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Definitions:

Damages

Monetary compensation awarded by a court to a person who has suffered loss or injury as a result of the action or inaction of another.

Absolute Privilege

A legal exemption that protects individuals from liability for what they say or write, especially in legislative, judicial, or certain government settings, regardless of the content or its potential to cause harm.

Defamation

The act of harming someone's reputation by making false and damaging statements about them.

Private Nuisance

A disturbance or interference with an individual's enjoyment or use of their property, without trespassing onto the property.