Fixed-Price Contracts Are Most Appropriate for Projects That

question 77

Multiple Choice

Fixed-price contracts are most appropriate for projects that

• A) take less than one year to complete.
• B) are with customers that want a single payment date.
• C) are well defined and entail little risk.
• D) involve risk.

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Definitions:

Most Efficient Output

The level of production where average total costs are minimized.

Explicit Costs

These are direct monetary payments a firm makes to purchase inputs for its production, such as wages, rent, and materials.

Implicit Costs

The opportunity costs of using resources already owned by the firm for production, as opposed to external spending.

Economic Profit

The difference between revenue generated from output and the opportunity costs of inputs used, considering both explicit and implicit costs.