Using the Above Figure, Suppose That Roses Are a Normal

question 472

Multiple Choice

Using the above figure, suppose that roses are a normal good. If incomes decrease while simultaneously there is an increase in the price of the resources used to produce roses, then

• A) the price will definitely increase above $25 per dozen roses.
• B) the quantity will definitely decrease below 10 dozen roses.
• C) the price will definitely decrease below $25 per dozen roses.
• D) we cannot tell what will happen to equilibrium quantity.

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Definitions:

Variable Cost Per Unit

Variable Cost Per Unit is the cost that varies directly with the production volume, including materials and labor directly involved in the production.

Total Fixed Cost

The sum of all costs that remain constant regardless of the level of production or sales activity.

High-low Method

The high-low method is a way of estimating the fixed and variable components of a cost by using the highest and lowest activity levels and their corresponding costs.

Fixed Costs

Expenses that do not change with the level of goods or services produced by the business, such as rent and salaries.