There Is Often a Trade-Off Between

question 48

Multiple Choice

There is often a trade-off between

• A)productive efficiency and allocative efficiency.
• B)limited and unlimited resources.
• C)voluntary and involuntary exchanges.
• D)economic efficiency and economic equity.

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs, indicating how much of the revenue contributes to covering fixed costs and generating profit.

Fixed Costs

Costs that do not change with the level of production or sales, such as rent and insurance.

Break-even Sales

The amount of revenue needed to cover both fixed and variable costs, resulting in zero net income or loss.

Variable Costs

Expenses that change in proportion to the activity or volume of production or sales, such as raw materials and direct labor.