A Firm with a Highly Inelastic Demand for Coal Will

question 65

Multiple Choice

A firm with a highly inelastic demand for coal will:

• A) cut consumption more than a firm with a highly elastic demand when price goes up.
• B) cut consumption less than a firm with a highly elastic demand when price goes up.
• C) refuse to cut consumption for any reason.
• D) stop using coal entirely if a tax is imposed.

---

Definitions:

Materials Price Variance

The difference between the actual cost of materials used in production and the expected (or standard) cost, which can indicate changes in market prices or issues with budgeting.

Raw Material

Basic materials that are used in the production process to manufacture goods.

Variable Overhead Rate

The rate at which variable overhead costs are allocated to each unit of production, which may vary with the level of output.

Direct Labor-Hours

Overall employment hours dedicated directly to the manufacturing operation.