Which of the Following Statements Is Not True

question 56

Multiple Choice

Which of the following statements is not true?

• A) Operating leverage refers to the extent to which a company's net income reacts to a given change in sales.
• B) Companies that have higher fixed costs relative to variable costs have higher operating leverage.
• C) When a company's sales revenue is increasing, high operating leverage is good because it means that profits will increase rapidly.
• D) When a company's sales revenue is decreasing, high operating leverage is good because it means that profits will decrease at a slower pace than revenues decrease.

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Definitions:

Competitive Firm

A company operating in a market where it has little to no influence over the price of its product or service, typically due to the presence of many other firms offering similar products.

Labor Market

The market in which individuals offer their labor for employment and employers seek to hire labor.

Inflation-adjusted Wages

Wages that have been modified to reflect the purchasing power after accounting for inflation, often to measure real income changes over time.

Labor Demand Curve

A graphical representation showing the quantity of labor that firms are willing to hire at different wage rates.