A Parcel Delivery Service Lowered Its Prices and Finds That

question 37

Essay

A parcel delivery service lowered its prices and finds that it has delivered twice as many parcels this year as it did last year. To illustrate this fact, the manager draws a graph as shown below. Each cube depicts a parcel. The side length of the "parcel" on the right is twice the side length of the "parcel" on the left. Why is this graph misleading? What visual impression is created by the graph?

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Definitions:

Profit

The financial gain obtained when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.

Sales Revenue

The total amount of money generated from the sale of goods or services before any costs or expenses are deducted.

Opportunity Cost

The expense incurred by not choosing the second-best option available during decision-making.

Producer Surplus

Is the difference between the amount producers are willing to accept for a product or service and the actual amount they receive.