If the Price of Oil, a Close Substitute for Coal

question 21

Multiple Choice

If the price of oil, a close substitute for coal, increases then the

• A)supply curve for coal will shift to the right.
• B)demand curve for coal will shift to the right.
• C)equilibrium price and quantity of coal will not change.
• D)demand curve for coal will shift to the left.
• E)supply curve of coal will shift to the left.

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Definitions:

Relevant Cost Decision Model

A decision-making tool that focuses on the costs directly related to a specific business decision, ignoring sunk costs and irrelevant expenses.

Recognises Revenues

The process of recording income in the financial statements when it is earned, according to the criteria set out in accounting standards.

Joint Cost Allocation

The process of distributing the costs of production that are incurred in producing multiple products at the same point of the process across those products.

Joint Costs

Costs that are incurred up to a split-off point in the production process, making them inseparable costs shared by more than one product.