If Cola and Iced Tea Are Good Substitutes for Consumers

question 14

Multiple Choice

If cola and iced tea are good substitutes for consumers, what can we conclude about their elasticity from this information?

• A) Their cross-price elasticities are greater than zero.
• B) Their income elasticities are less than zero.
• C) Their price elasticities of supply are less than one.
• D) Their price elasticities of demand are less than one.

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Definitions:

Machine-hours

An indicator of the duration for which equipment is utilized in the manufacturing process, commonly employed for distributing manufacturing overhead costs.

Contribution Margin

The amount remaining from sales revenue after variable expenses are deducted, indicating the potential profitability of products.

Net Operating Income

A measure of a company's profitability from its core business operations, excluding non-operating income and expenses.

Variable Expense Ratio

A measurement that indicates the proportion of variable expenses to sales, showing how costs change with sales volume.