The Fact That New Methods to Extract Oil Are Developed

question 110

Multiple Choice

The fact that new methods to extract oil are developed as oil prices increase suggests

• A)that methods of production do not change in response to factor-price changes.
• B)that invention is exogenous.
• C)that invention does respond to economic signals and is endogenous.
• D)that oil has many close substitutes.
• E)nothing; changes in technology occur regardless of market prices.

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Definitions:

Contribution Margin Ratio

The percentage of each sales dollar that remains after variable costs have been deducted, contributing towards covering fixed costs and generating profit.

Net Operating Income

The total profit of a company after operating expenses are subtracted from gross profit but before income taxes and interest are deducted.

Fixed Monthly Expenses

Regularly occurring costs that remain the same each month, such as rent or salaries.

Contribution Format Income Statement

An income statement format that separates fixed costs from variable costs and is used to calculate the contribution margin.