Scenario 21-1 Suppose the Price of Hot Wings Is $10, the Price

question 309

Multiple Choice

Scenario 21-1
Suppose the price of hot wings is $10, the price of beer is $1, and the consumer's income is $50. In addition, suppose the consumer's budget constraint illustrates hot wings on the horizontal axis and beer on the vertical axis.
-Refer to Scenario 21-1. If the price of beer doubles to $2, then the

• A)budget constraint intersects the vertical axis at 25 beers.
• B)slope of the budget constraint rises to -2.
• C)slope of the budget constraint falls to -4.
• D)budget constraint shifts inward in a parallel fashion.

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Definitions:

Unit Selling Price

The amount of money charged to a customer for a single unit of a product or service.

Unit Variable Costs

Costs that vary directly with the production volume, such as materials and labor, on a per-unit basis.

Contribution Margin Ratio

A financial metric that shows how much of a company's revenue is available after variable costs to cover fixed costs and generate profit.

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit, showing how much each unit contributes to covering fixed costs and generating profit.