If the Price Elasticity of Demand Is 2 in Absolute

question 89

Multiple Choice

If the price elasticity of demand is 2 in absolute value, thenwhen the price of Good X rises by 25 percent:

• A)the quantity demanded of Good X rises by 50 percent.
• B)the quantity demanded of Good X falls by 50 percent.(True Answer )Correct
• C)the quantity demanded of Good X rises by 12.5 percent.
• D)the quantity demanded of Good X falls by 12.5 percent.

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Definitions:

Predetermined Overhead Rate

A rate calculated at the beginning of an accounting period to allocate overhead costs to products or services based on a relevant activity base.

Variable Manufacturing Overhead

Costs that vary with the level of production output and may include items such as utility expenses and raw materials.

Direct Labor-Hours

Total time spent by staff members who are directly part of the manufacturing operations.

Fixed Manufacturing Overhead

Fixed manufacturing overhead includes regular, consistent costs involved in manufacturing that do not vary with the level of production, such as salaries of managers and factory rent.