-Use the Figure Above to Answer This Question

question 44

Multiple Choice

-Use the figure above to answer this question. Suppose the economy is operating at point a. A move to could be explained by .

• A) point b; an increase in real GDP
• B) point b; an increase in interest rates
• C) point e; an increase in U.S. exports
• D) point c; an increase in the use of credit cards

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Definitions:

Relevant Range

The range of activity or volume over which the assumptions about variable and fixed cost behaviors hold true, beyond which cost patterns may change.

Cost Behavior

The way in which a cost reacts to changes in the level of activity.

Fixed Cost

Costs that do not change with the level of production or output, remaining constant even as volume changes.

Relevant Range

The range of activity within which the assumptions about fixed and variable costs are valid. Beyond this range, cost behaviors may change.