The Commodity Substitution Bias Is That

question 96

Multiple Choice

The commodity substitution bias is that

• A)consumers substitute high-quality goods for low-quality goods.
• B)government spending is a good substitute for investment expenditures.
• C)national saving and foreign borrowing are interchangeable.
• D)consumers decrease the quantity they buy of goods whose relative prices rise and increase the quantity of goods whose relative price falls.
• E)consumers substitute more expensive goods for less expensive goods when technology advances.

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Definitions:

Direct Manufacturing Cost

The sum of all the costs directly associated with the production of a good, including raw materials and direct labor.

Indirect Manufacturing Costs

Costs related to production that cannot be directly traced to specific products, such as maintenance and utilities.

Contribution Margin

The margin between the income from sales and the costs that vary, pointing out the contribution towards absorbing fixed charges and producing profits.

Variable Manufacturing Costs

Costs of production that fluctuate with the volume of output, including expenses like raw materials and direct labor.