Which of the Following Best Describes Subcontracting

question 75

Multiple Choice

Which of the following best describes subcontracting?

• A) provides additional output capacity during periods of high demand
• B) it is a strategic decision
• C) cost per unit is less for subcontracting
• D) used when a company has no in-house capability
• E) it defines the company's core business

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Definitions:

Marginal Cost

The expense associated with the next unit produced, emphasizing its role in production decisions and price setting.

Economic Profit

This is the difference between total revenue and total costs, including both explicit and implicit costs.

Monopoly Profit

The excess profits a monopoly firm earns over what it would earn if the industry were perfectly competitive, due to its control over the market supply and pricing.

Profit Maximizing

A strategy or point where a firm or individual produces at a level where the difference between total revenue and total cost is the greatest.