Bananas and Apples Are Substitutes

question 108

Multiple Choice

Bananas and apples are substitutes.When the price of bananas falls and a technological advancement in apple production occurs at the same time,

• A) the equilibrium price of apples rises and the equilibrium quantity of apples falls.
• B) the equilibrium price of apples rises and the equilibrium quantity of apples rises.
• C) the equilibrium price of apples rises and the equilibrium quantity of apples might rise or fall.
• D) the equilibrium price of apples falls and the equilibrium quantity of apples might rise or fall.

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Definitions:

Fixed Cost

Fixed cost refers to business expenses that remain constant regardless of the level of production or sales, such as rent, salaries, or insurance, integral to budgeting and planning.

Total Expenses

The sum of all costs and expenses, both fixed and variable, incurred by a business during a specific period.

Planning Budget

A budget prepared for a specific level of activity, used as a tool for comparing actual results to see if plans and objectives are being met.

Fixed Cost

Expenses that do not change in relation to the level of goods or services produced within a certain range of activity.