Assume That Butter and Margarine Are Substitutes

question 246

Multiple Choice

Assume that butter and margarine are substitutes. When the price of butter increases:

• A) the demand for margarine increases.
• B) the supply of margarine decreases.
• C) the demand for margarine decreases.
• D) the supply of margarine increases.

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Definitions:

Alternative Choices

Different options or courses of action that can be taken in a decision-making process.

Sunk Cost

A cost that has already been incurred and cannot be recovered, regardless of future events.

Differential Cost

The difference in cost between two alternative decisions or changes in the level of output or activity.

Total Cost Method

The total cost method is an accounting approach that sums all costs involved in producing or buying goods to determine their overall expense.