A General Rule to Use in Assessing the Average Collection

question 101

Multiple Choice

A general rule to use in assessing the average collection period is that it

• A)should not exceed 30 days.
• B)can be any length as long as the customer continues to buy merchandise.
• C)should not greatly exceed the return period.
• D)should not greatly exceed the credit term period.

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Definitions:

Optimal Consumption

The combination of goods and services that provides the highest level of satisfaction to an individual, given their income and the prices of those goods and services.

Prices Constant

An assumption in economic analysis that prices remain unchanged over a specific period, allowing for the examination of other variables' effects without price fluctuations.

Diminishing Marginal Rate

The principle that as the quantidade of a variable input increases, with all other inputs fixed, a point will be reached where the additions to output will begin to decrease.

Substitution

The economic principle describing how consumers or producers replace one good or service with another in response to changes in price or other factors.