Which of the Following Reflects a Practical Example of the Price

question 29

Multiple Choice

Which of the following reflects a practical example of the price confusion problem?

• A) Lines are short at the coffee shop you own because your resource prices are rising and your retail prices must be raised at the same rate; your customers are confused as to whether they should buy from your shop.
• B) Long lines at the coffee shop you own prompt you to open a new coffee shop,and the second shop is successful.
• C) It is difficult for you to determine whether the long lines at your coffee shop are due to increased demand or because inflation has created "too many dollars chasing too few goods."
• D) It is difficult for you to determine the right signal to send to your consumers through prices because the signal sent to you by the Bureau of Labor Statistics is easily misinterpreted.
• E) Signals sent from consumers to producers are clear but those from producers to consumers are confused.

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Definitions:

Profit Margin

A financial metric indicating the percentage of income left over from revenues after accounting for costs and expenses.

Activity Base

A measure used to allocate costs to activities, such as units produced, hours worked, or miles driven.

Service Departments

Units within an organization that support other departments but do not directly contribute to profit, such as human resources and maintenance.

Investment Turnover

A measure of a company's ability to use its assets to generate sales or revenue, indicating how efficiently the investments are being used.