When Considering a Project That Will Require Production Using Otherwise

question 142

Multiple Choice

When considering a project that will require production using otherwise idle resources, which of the following are true?

• A) Avoidable fixed costs are irrelevant.
• B) Only the variable costs of the project are relevant.
• C) Only financial factors should be considered.
• D) The project should not be undertaken if total revenue from the project is less than the total costs of production.
• E) In the short run, even if revenue is less than the total costs of production, the project could help the company's overall operating income.

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Definitions:

Utility Function

A mathematical representation of how a set of goods and services are converted into utility or satisfaction for the consumer.

Numeraire

A standard unit of account in economic modeling used to measure relative prices.

Spaghetti Consumption

The amount or rate at which individuals or populations eat spaghetti, often studied in terms of dietary habits or economic factors.

Utility Function

A mathematical representation that defines individual preferences for consumption bundles by assigning a utility value to each bundle.