Suppose That the Price of Pepsi Decreases from $4

question 9

Multiple Choice

Suppose that the price of Pepsi decreases from $4.50 to $4.20 per twelve-pack. The law of demand states that if other things are held constant:

• A) quantity demanded will increase.
• B) quantity demanded will decrease.
• C) quantity supplied will increase.
• D) quantity supplied will decrease.

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Definitions:

Variable Cost Per Unit

Variable cost per unit is the cost that varies with the level of output, calculated by dividing the total variable costs by the number of units produced.

Activity Level

The degree of operational intensity or volume of production in a business, often influencing costs and revenues.

Contribution Margin

The amount by which sales revenue exceeds variable costs, indicating how much revenue contributes toward covering fixed costs and generating profit.

Variable Costs

Costs that change in proportion to the level of activity or volume of goods produced.