If You Pay a Total of $10 to Purchase 2

question 141

Multiple Choice

If you pay a total of $10 to purchase 2 units of a good and would have been willing to pay $14, then

• A) you receive a producer surplus of $2.
• B) your receive a producer surplus of $4.
• C) you do not have consumer sovereignty.
• D) you receive a consumer surplus of $4.
• E) you receive a consumer surplus of $2.

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Definitions:

Target Costing

A pricing strategy where a product's selling price is determined first based on market conditions, and then the goal is to meet or come under this price through cost control and design efficiencies.

Minimum Return

The lowest acceptable rate of return on an investment that a person or company would consider worthwhile.

Investment

The allocation of resources, usually money, in expectation of generating an income or profit.

Target Costing

A pricing method where the selling price is set first, and then the target cost for producing the product is determined by subtracting a desired profit margin.