The Nunn Co

question 48

Multiple Choice

The Nunn Co. produces a single product. Its cost structure is: If the firm sells 5,000 units per period, what price should be charged to earn $35,000?

• A) $44
• B) $45
• C) $50
• D) $51

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Definitions:

Average Fixed Cost

The fixed costs of production divided by the quantity of output produced, which decreases as production increases.

Law Of Diminishing Returns

An economic principle stating that if one factor of production is increased while others remain constant, the overall returns will eventually decrease after a certain point.

Economies Of Scale

The situation when a firm’s average total cost of producing a product decreases in the long run as the firm increases the size of its plant (and, hence, its output).

Variable Inputs

Factors of production that change in quantity as the level of output changes, such as labor or raw materials, in contrast to fixed inputs like machinery or land.