Which of the Following Would You NOT Consider When Making

question 92

Multiple Choice

Which of the following would you NOT consider when making a capital budgeting decision?

• A) the additional taxes a firm would have to pay in the next year
• B) the cost of a marketing study completed last year
• C) the opportunity to lease out a warehouse instead of using it to house a new production line
• D) the change in direct labor expense due to the purchase of a new machine

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Definitions:

Economic Profits

Profits calculated by subtracting both explicit and implicit costs from total revenues, representing the additional income earned over and above the opportunity costs.

Competitive Market

A market structure characterized by a large number of buyers and sellers, free entry and exit, and a product for which each seller offers an identical product.

Market Price

Market price is the current price at which an asset or service can be bought or sold in a given market.

Marginal Cost Curve

A graphical representation showing how the cost to produce one additional unit changes as more units are produced.