A Company Is Evaluating Which of Two Alternatives Should Be

question 51

Multiple Choice

A company is evaluating which of two alternatives should be used to produce a product that will sell for $35.00 per unit.The following cost information describes the two alternatives

If total demand volume) is 120,000 units,then the company should

• A)select Process A with a profit of $940,000 to maximize profit
• B)select Process B with a profit of $450,000 to maximize profit
• C)select Process A with a profit of $700,000 to maximize profit
• D)select Process B with a profit of $690,000 to maximize profit

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Definitions:

Producer Surplus

The difference between the amount producers are willing and able to supply a good for and the amount they actually receive.

Market Price

The amount of money a buyer pays and a seller receives for a product or service in a competitive marketplace.

Producer Surplus

The difference between the amount a producer is paid for a good compared to the minimum amount they would be willing to accept, representing profit.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service and the actual amount they receive due to higher market price.