Bob's Butcher Shop Is the Only Place Within 100 Miles

question 436

Multiple Choice

Bob's Butcher Shop is the only place within 100 miles that sells bison burgers. Assuming that Bob is maximizing his profit, which of the following statements is true?

• A)The price of Bob's bison burgers will be less than Bob's marginal cost.
• B)The price of Bob's bison burgers will exceed Bob's marginal cost.
• C)The price of Bob's bison burgers will equal Bob's marginal cost.
• D)Costs are irrelevant to Bob because he is a monopolist.

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Definitions:

Fixed Costs

Expenses that do not change with the amount of goods or services produced, such as rent or salaries.

Marginal Costs

Refers to the cost added by producing one extra item of a product, emphasizing its role in decision making regarding production levels.

Variable Costs

Costs that change in proportion to the level of activity or volume of production in a business.

Total Fixed Costs

The total of all expenses that stay the same no matter the amount of production or output.