Which of the Following Is Likely to Be True of a Product

question 87

Multiple Choice

Which of the following is likely to be true of a product that has a large number of substitutes?

• A) Its income elasticity is likely to be zero.
• B) It is likely to be highly price elastic.
• C) It will be highly valued because of its exclusivity.
• D) Its cost of production is likely to be low.

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Definitions:

Provisions

Liabilities of uncertain timing or amount, recorded to account for future obligations or potential losses.

Contingent Liabilities

Possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

Contingent Assets

Possible assets that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of certain future events not wholly within the control of the company.

Constructive Obligation

An obligation that derives from an entity’s actions where: (a) by an established pattern of past practice, published policies or a sufficiently specific current statement, the entity has indicated to other parties that it will accept certain responsibilities; and (b) as a result, the entity has created a valid expectation on the part of those other parties that it will discharge those responsibilities.