The Marginal Rate of Substitution Measures the

question 252

Multiple Choice

The marginal rate of substitution measures the

• A)magnitude of the substitution effect.
• B)total utility received by a consumer when equilibrium is achieved.
• C)extra utility that a consumer derives from successive units of a product.
• D)consumer's willingness to substitute one product for another so that total utility will remain constant.

---

Definitions:

Contribution Margin

The difference between sales revenue and variable costs of a product or service, indicating how much contributes towards covering fixed costs and generating profit.

Gross Margin

A financial measurement that calculates the difference between a company’s total revenue and the cost of goods sold, expressed as a percentage of total revenue.

Variable Costing

An accounting method that records variable costs (costs that change with production levels) as product costs, while fixed costs are recorded as expenses in the period they are incurred.

Absorption Costing

A method in accounting that involves integrating all costs related to manufacturing, namely direct materials, direct labor, and all variable and fixed overhead expenses, into the pricing of a product.