Which of the Following Purchases Is Most Likely to Rise

question 84

Multiple Choice

Which of the following purchases is most likely to rise as the result of a temporary tax cut,according to the permanent-income hypothesis?

• A)television sets and other consumer durables
• B)steak dinners and other consumer non-durables
• C)trips to the Virgin Islands and other vacation destinations
• D)theater tickets and other entertainment expenditures

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Definitions:

Marginal Revenue Product

The supplementary income realized by the application of one more unit of a resource, like labor or capital.

Labor

The engagement of human physical strength and intellectual power in producing goods and offering services.

Additional Revenue

The increase in total revenue that results from selling an additional unit of a product or service.

Profit-Maximizing Output

The level of production at which a company achieves the highest possible profit margin, given its costs and market demand.