If a Firm Is Planning to Operate in an Environment

question 29

Multiple Choice

If a firm is planning to operate in an environment in which there will be a great deal of variability in the level of revenues, then the firm:

• A) should structure its cost structure to have high fixed costs and higher total variable costs.
• B) should structure its cost structure to have high fixed costs and consequently lower per unit variable costs.
• C) should structure its cost structure to have low fixed costs and consequently higher per unit variable costs.
• D) should leave the cost structure unchanged.

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Definitions:

Ecology

Study of the interactions of organisms with other organisms and with the physical and chemical environment.

Environmental Resistance

The combined physical, chemical, and biological limiting factors that restrict the growth, abundance, or distribution of an organism or a population within an environment.

Communities

Social groups of any size whose members reside in a specific locality, share government, and often have a common cultural and historical heritage.

Environmental Resistance

The sum of environmental factors (like predation, competition, and disease) that limit the population growth of an organism.