Straker Industries Estimated Its Short-Run Costs Using a U-Shaped Average

question 8

Multiple Choice

Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form and obtained the following results.Total fixed cost TFC) at Straker Industries is $1,000. If Straker Industries produces 12 units of output,what is estimated average total cost ATC) ?

• A)$121.93
• B)$171.40
• C)$463.20
• D)$1,348

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Definitions:

Equity Multiplier

A ratio of financial leverage that calculates the proportion of a company's assets funded by its shareholders' equity.

Total Assets Turnover Ratio

Measures the turnover of all the firm’s assets; it is calculated by dividing sales by total assets.

Debt Ratio

A financial ratio that measures the extent of a company’s or individual's leverage, calculated by dividing total liabilities by total assets.

Window Dressing

Techniques employed by firms to make their financial statements look better than they really are.