A Fall in the Price of the Final Product Produced

question 268

Multiple Choice

A fall in the price of the final product produced by a firm will cause

• A) a decline in the price of an input used to produce the good.
• B) a movement down the demand curve for an input used to produce the final product.
• C) a reduction in demand for an input used to produce the final product.
• D) a reduction in the supply of an input used to produce the final product.

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Definitions:

Operating Leverage

A metric assessing the impact of increased sales on operational earnings, revealing the balance between a firm's fixed and variable expenses.

EBIT

Earnings Before Interest and Taxes, a measure of a company's profitability that excludes interest and income tax expenses to show the business's core profitability.

DOL

Department of Labor, a U.S. government department responsible for occupational safety, wage standards, unemployment insurance benefits, re-employment services, and some economic statistics.

Financial Leverage

The use of debt to increase the potential return of an investment.