The problem of limited and bundled choice in the political process tends to multiple choice 1 reduce economic efficiency, because politicians choose programs with positive and negative net benefits. increase economic efficiency, because politicians choose programs with average net benefits. increase economic efficiency, because politicians choose programs with positive and negative net benefits. reduce economic efficiency, because politicians choose programs with average net benefits. b. Public bureaucracies are possibly less efficient than business firms because multiple choice 2 workers in public bureaucracies have less supervision and shirk their responsibilities. the private market is driven by profit, but this competitive force does not operate in public bureaucracies. the private market has more resources than public bureaucracies. the private market has access to better technologies than public bureaucracies.

Fanning company is considering the addition of a new product to its cosmetics line. the company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. relevant information and budgeted annual income statements for each of the products follow. skin cream bath oil color gel budgeted sales in units (a) 110,000 190,000 70,000 expected sales price (b) $8 $4 $11 variable costs per unit (c) $2 $2 $7 income statements sales revenue (a × b) $880,000 $760,000 $770,000 variable costs (a × c) (220,000) (380,000) (490,000) contribution margin 660,000 380,000 280,000 fixed costs (432,000) (240,000) (76,000) net income $228,000 $140,000 $204,000 required: (a) determine the margin of safety as a percentage for each product. (b) prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. (c) for each product, determine the percentage change in net income that results from the 20 percent increase in sales. (d) assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? (e) assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line?