A Firm in Perfect Competition Produces 15 Widgets and Sells

question 115

Multiple Choice

A firm in perfect competition produces 15 widgets and sells them for a total revenue of $300.At this level of output,the average total cost is $25 per unit,and the average variable cost is $24 per unit.To maximize profit (or minimize loss) ,this firm should produce:

• A) 0 widgets
• B) 5 widgets
• C) 10 widgets
• D) 15 widgets
• E) 20 widgets

Understand and calculate key financial ratios, including ROE, asset turnover, and leverage ratio.

Comprehend the concept of economic value added (EVA) and its calculation.

Identify the quality of a firm's earnings and the influence of accounting practices.

Recognize the ethical considerations and financial implications of managerial decisions on cash flow and earnings.

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Definitions:

Fixed Costs

Fixed costs are business expenses that remain constant regardless of changes in production level or sales volume, such as rent, salaries, or insurance.

Budgeting

The process of creating a plan to spend money, outlining an organization's financial and operational goals.

Flexible Budget

A budget that molds itself to fit changes in the volume or intensity of activity.

Other Expenses

Costs not directly related to the production or selling of goods and services, such as interest expenses and loss from foreign exchange.