Quito Contracts with Rewind Graphix,Inc

question 21

Multiple Choice

Quito contracts with Rewind Graphix,Inc.,to pay $5,000 for its work on the animated film "Song." After Rewind performs,they sign an accord,in which Quito promises to pay $4,000 within ten days instead of $5,000 later.But Quito does not pay.Rewind can sue Quito under

• A)neither the accord nor the original obligation.
• B)the accord only.
• C)the accord or the original obligation.
• D)the original obligation only.

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Definitions:

Profit-Maximizing

The process by which a firm determines the price and output level that returns the maximum profit.

Marginal Cost

The increase or decrease in the total cost that arises from producing one additional unit of a product.

Annual Fixed Cost

Expenses that do not change in proportion to the activity of a business, within the period of a year.

Socially Efficient

An economic condition where resources are allocated in a way that maximizes total social welfare.