Jaybird Company Operates in a Highly Competitive Market Where the Market

question 36

Multiple Choice

Jaybird Company operates in a highly competitive market where the market price for its product is $50 per unit.Jaybird desires a $15 profit per unit.Jaybird expects to sell 5,000 units.Additional information is as follows: $$\begin{array}{l}\begin{array} { l l r } \text { Variable product cost per unit}&\$15\\\text { Variable administrative cost per unit}&10\\\text { Total fixed overhead}&45,000\\\text { Total fixed administrative}&18,000\end{array}\end{array}$$ To achieve the target cost per unit,Jaybird must reduce total expenses by how much?

• A)$14,500
• B)$3,500
• C)$23,000
• D)$20,000
• E)$13,000

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Definitions:

Common Resource

A resource like air or water that is not owned by anyone, cannot be easily excluded from use, and is available for use by more than one person or group.

Nonexcludable

A characteristic of a good or service that prevents individuals from being effectively excluded from its use or benefits.

Free-rider Problem

A situation in which individuals consume more than their fair share or pay less than their fair share of the cost of a shared resource.

Public Good

A good that is non-excludable and non-rivalrous, meaning its consumption by one individual does not reduce its availability to others.