A Perfectly Inelastic Demand Curve Indicates That

question 36

Multiple Choice

A perfectly inelastic demand curve indicates that

• A) a producer can sell as many units as desired at the market price but no units above the market price.
• B) for a given percent change in price, the quantity demanded rises by the same percentage.
• C) price has no effect on the quantity demanded.
• D) the percent change in price is less than the percent change in quantity demanded.

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed overhead) in the cost of a product.

Fixed Costs

Costs that remain constant in total regardless of changes in the level of the business activity or production volume.

Product Costs

Costs that are directly associated with the production of goods or services, including direct materials, direct labor, and manufacturing overhead.

Traceable Fixed Expense

Expenses that can be directly linked to a specific department or segment of a business and would disappear if the department or segment was disbanded.