Consider the Demand Curves Facing Two Firms: for Curve 1

question 117

Multiple Choice

Consider the demand curves facing two firms: For curve 1, a $4 decrease in price increases quantity demanded by 2 units. For curve 2, a $3 decrease in price increases quantity demanded by 1 unit. Curve _____ is steeper, so an expansion of output drives down marginal revenue more along _____.

• A) 2; curve 2 than curve 1
• B) 2; curve 1 than curve 2
• C) 1; curve 1 than curve 2
• D) 1; curve 2 than curve 1

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Definitions:

Continuous Budgeting

A process of constantly updating a budget for a set period in the future to reflect changes as they happen.

Safety Stock

Additional inventory held by a company to prevent stockouts, usually due to uncertainties in supply and demand.

Master Budget

A comprehensive financial plan that combines all of the individual budgets related to sales, costs, expenses, assets, and liabilities.

Merchandise Purchases Budget

A financial plan detailing the amount of goods that a retail or wholesale company plans to buy over a certain period to meet anticipated sales.