Table 18-12 The Table Displays Data for a Small, Competitive, Profit-Maximizing Firm

question 254

Multiple Choice

Table 18-12
The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week.
-Refer to Table 18-12. Suppose the firm sells each box of envelopes that it produces for $7. Suppose also that the firm's fixed costs amount to $400. How many workers should the firm hire in order to maximize profit, and what is the maximum profit?

• A)The firm should hire 2 workers; its maximum profit is $80.
• B)The firm should hire 2 workers; its maximum profit is $96.
• C)The firm should hire 3 workers; its maximum profit is $96.
• D)The firm should hire 3 workers; its maximum profit is $124.

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Definitions:

Variable Production Cost

Costs that change in proportion to the level of production output, such as raw materials and direct labor.

Supervisory Costs

Expenses associated with overseeing and managing employees or a production process.

Grinding Minutes

Grinding minutes are a measure of the time spent in the process of grinding, which is a machining process used to improve surface finish or obtain precise dimensions by removing small amounts of material.

Monthly Demand

The total quantity of a product or service that consumers are willing and able to purchase within a month.