For a Particular Good,a 5 Percent Increase in Price Causes

question 237

Multiple Choice

For a particular good,a 5 percent increase in price causes a 2 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

• A)There are many close substitutes for this good.
• B)The good is a luxury.
• C)The market for the good is broadly defined.
• D)The relevant time horizon is long.

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Definitions:

Fixed Costs

Costs that do not change with the level of production or sales activities, such as rent, salaries, and insurance premiums.

Variable Manufacturing Overhead

Costs that vary with production volume, such as utilities and materials, which are only incurred as a result of manufacturing activities.

Direct Materials

Raw materials that are directly traceable to the production of specific goods or services.

Contribution Margin

The amount by which sales revenue exceeds variable costs, contributing to covering fixed costs and generating profit.