Each Month Fig Company Produces 11,000 Units of a Product

question 117

Multiple Choice

Each month Fig Company produces 11,000 units of a product that sells for $18 per unit,and has variable costs of $12 per unit.Total fixed costs for the month are $77,000.A special order is received for 5,000 units at a price of $14 per unit.Fig Company has adequate capacity for the special order.If Fig Company accepts the special order,what is the profit to Fig Company from the special order?

• A) $0
• B) $10,000
• C) $22,000
• D) $99,000

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Definitions:

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount they actually pay.

Marginal Cost

The financial outlay required to produce a further unit of a product or service.

Pollution Abatement

Actions taken to reduce, control, or eliminate pollution from sources in order to protect the environment.

Marginal Utility

The supplementary utility or enjoyment obtained by consuming an additional unit of a good or service.