The Owner of a Gas Station Records the Number of Gallons

question 57

Multiple Choice

The owner of a gas station records the number of gallons of gas he sells over a period of time. He notices that the number of gallons of gas he sells depends linearly on the price he charges for each gallon. When he charges $1.96 per gallon of gas he sells 800 gallons of gas each day. When he charges $2.65 per gallon he sells 400 gallons. Which one of the following graphs illustrate this situation?

• A) None of these options

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Definitions:

Law of Diminishing Marginal Returns

A principle stating that adding an additional factor of production results in smaller increases in output after a certain point, holding other inputs constant.

Variable Input

An input used in production that can be adjusted in the short term, such as labor or raw materials.

Short Run

A period in which at least one input or resource is fixed, limiting the capacity to adjust all factors of production.

Increasing Returns

The situation in which output increases by a larger proportion than the increase in inputs used in production.