Under the Kinked Demand Curve Model,an Increase in Marginal Cost

question 10

Multiple Choice

Under the kinked demand curve model,an increase in marginal cost will lead to

• A)an increase in output level and a decrease in price.
• B)a decrease in output level and an increase in price.
• C)a decrease in output level and no change in price.
• D)neither a change in output level nor a change in price.

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Definitions:

Fixed Costs

Fixed Costs are business expenses that remain constant regardless of the level of production or sales activity, such as rent, salaries, and insurance.

Profit-volume Chart

A Profit-Volume Chart is a graphical representation that shows the relationship between a firm's profits and its volume of sales, illustrating the impact of different sales levels on profits.

Total Sales Revenues

The total income received by a company from its sales of goods or services, before any expenses are subtracted.

Total Costs

The complete sum of expenses incurred by a company in producing goods or services, including fixed, variable, and semi-variable costs.