Farnor, Inc

question 5

Multiple Choice

Farnor, Inc. , would like to estimate the variable and fixed components of its electrical costs and has compiled the following data for the last four months of operations. Using the high-low method of analysis, the estimated fixed cost per month for electricity is closest to:

• A)$53.46
• B)$0.00
• C)$3.40
• D)$48.00

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Definitions:

Quantity Equation

The quantity equation relates the quantity of money in an economy to the nominal value of economic transactions, serving as a foundation for theories on money supply and price levels.

Real Income

The income of an individual or group after taking into consideration the effects of inflation on purchasing power.

Monetary Neutrality

The concept that changes in the money supply only affect nominal variables in the economy (such as prices, wages, and exchange rates) in the long term, without affecting real variables (like employment and real GDP).

Long Run

A period in which all factors of production and costs are variable, allowing firms to adjust to new conditions or markets.