Which of the Following Would Produce the Largest Increase in the Contribution

question 54

Multiple Choice

Which of the following would produce the largest increase in the contribution margin per unit?

• A) A 7% increase in selling price.
• B) A 15% decrease in selling price.
• C) A 14% increase in variable cost.
• D) A 17% decrease in fixed cost.
• E) A 23% increase in the number of units sold.

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Definitions:

Positive Externality

An economic situation where a third party benefits from a transaction or activity they are not directly involved in.

Negative Externality

A cost suffered by a third party due to an economic transaction or activity, without compensation, such as pollution from a factory affecting nearby residents.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning that one person's consumption does not reduce the availability to others, and it's hard to prevent people from using them.

Nonrivalry-in-Consumption

A characteristic of certain goods where one person's consumption does not reduce the availability of the good for consumption by others.