As a Consumer Moves Along a Budget Constraint

question 7

Multiple Choice

As a consumer moves along a budget constraint:

• A) prices are held constant, but income changes.
• B) income is held constant, but prices change.
• C) prices and income are held constant, but quantities change.
• D) total utility is held constant, but prices and income change.

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Definitions:

Contribution Margin

The amount remaining from sales revenue after variable costs have been deducted, indicating how much contributes to covering fixed costs and generating profit.

Manufacturing Margin

The difference between the sales revenue generated from manufactured goods and the cost of goods sold (COGS), highlighting the profitability of manufacturing activities.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs and treats fixed manufacturing overhead as a period cost.

Operating Income

Income generated from regular business operations, excluding revenues and expenses from non-operating activities.