The Congress Company Has Identified Two Methods for Producing Playing

question 2

Multiple Choice

The Congress Company has identified two methods for producing playing cards. One method involves using a machine having a fixed cost of $10,000 and variable costs of $1.00 per deck of cards. The other method would use a less expensive machine (fixed cost = $5,000) , but it would require greater variable costs ($1.50 per deck of cards) . If the selling price per deck of cards will be the same under each method, at what level of output will the two methods produce the same net operating income?

• A) 5,000 decks
• B) 10,000 decks
• C) 15,000 decks
• D) 20,000 decks
• E) 25,000 decks

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Definitions:

Price Elasticity

Measures how much the quantity demanded of a good changes in response to a change in its price.

Coefficient

A numerical or constant quantity placed before and multiplying the variable in an algebraic expression.

Inelastic

Describing a situation where the demand for a good or service is relatively unaffected by changes in its price.

Essential Consumption

The purchase and use of goods and services that are considered necessary for basic living and well-being.