Which One of the Following Statements Is Correct

question 19

Multiple Choice

Which one of the following statements is correct?

• A)If the majority of a firm's new customers become repeat customers then there is a strong argument against extending credit even if the default rate is low.
• B)A customer's past payment history reveals little information in relation to his or her future tendency to pay.
• C)A suggested policy for offering credit to new customers is to limit the amount of their initial credit purchase.
• D)The risk of issuing credit is the same for a new customer as it is for an existing customer.
• E)The recommended credit policy for new customers is to extend the maximum amount of credit you will ever be willing to offer as an enticement to get their business.

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Definitions:

Supply Curve

An illustrated chart that demonstrates how the supply quantity relates to a good's price.

Producer Surplus

The discrepancy between what sellers are prepared to accept for a commodity and the real payment they secure from selling it at the prevailing market price.

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good that suppliers are willing to sell, typically upwards sloping.

Consumer Surplus

The difference between the sum total consumers are ready and capable of contributing towards a good or service and what they genuinely contribute.