The Economy Has Been Compared to a Supertanker on the Ocean

question 7

Multiple Choice

The economy has been compared to a supertanker on the ocean to make the point that

• A)the larger the economy,the less it is influenced by other economies (the weather).
• B)it takes time for a policy change to overcome the economy's momentum and change its direction (as in steering an immense ship).
• C)a random shock affects all parts of the economy in the same way (as all of a ship rises or falls together with the waves).
• D)the larger the economy,the worse it is for the rest of the world when it goes into a recession (there is enough oil in a supertanker for a spill to stretch across the ocean).

---

Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales, including rent, salaries, and insurance premiums, providing stability in budgeting and planning.

Value-based Pricing

A pricing strategy where the price is set based on the perceived value to the customer rather than based on the cost of the product or historical prices.

Economic Value

The measure of the benefit provided by a good or service to an economic agent.

Target Costing

Target costing is a pricing method used during the development phase of a product to ensure that costs do not exceed the target price minus desired profit, thereby ensuring competitiveness and profitability.