An Economic Theory Claims That a Rise in Gasoline Prices

question 115

Multiple Choice

An economic theory claims that a rise in gasoline prices will cause gasoline purchases to fall, Ceteris paribus. The phrase "Ceteris paribus" means that:

• A) other relevant factors like consumer incomes must be held constant.
• B) the gasoline prices must first be adjusted for inflation.
• C) the theory is widely accepted but cannot be accurately tested.
• D) consumers' need for gasoline remains the same regardless of the price.

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Definitions:

Variable Cost

Expenses that change in proportion to the level of production or sales in a company.

Fixed Cost

A cost that does not change with an increase or decrease in the amount of goods or services produced or sold.

Marginal Cost

The financial increase incurred by adding one more unit to the production of a product or service.

Short Run

A time period in economics during which at least one input (e.g., plant size, machinery) is fixed, affecting the firm's capacity to adjust production levels.