(Figure: Quantity of Goods Y and X II) Because of the Income

question 76

Multiple Choice

(Figure: Quantity of Goods Y and X II) Because of the income effect associated with the decrease in the price of good X, the quantity of good X purchased:

• A) increases from 3 to 4.
• B) increases from 4 to 5.
• C) decreases from 5 to 4.
• D) increases from 3 to 5.

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Definitions:

Fixed Manufacturing Cost

Costs that do not vary with the level of manufacturing output, including rent, salaries of permanent staff, and depreciation of factory equipment.

Modify

Alteration or adjustment to change an existing condition or set of properties.

Indifferent

Having no particular interest or concern; not inclined toward one view, position, or outcome over another.

Direct Fixed Expenses

Costs that are directly associated with a specific department or segment of a business and do not vary with the level of production or sales.