Which of the Following Changes in Disposable Income Would Lead

question 178

Multiple Choice

Which of the following changes in disposable income would lead to the smallest increase in consumption?

• A)a $30 000 increase in disposable income, if MPC equals 0.25
• B)a $15 000 increase in disposable income, if MPC equals 0.6
• C)a $20 000 increase in disposable income, if MPC equals 0.5
• D)a $12 000 increase in disposable income, if MPC equals 0.75

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Definitions:

Average Variable Cost Curve

A graphical representation showing how the average variable cost changes as the quantity of output is increased.

Firm

An organization that produces goods or services for sale, operating with the aim of making a profit.

Variable Costs

Costs that change in proportion to the level of production or sales volume.

Profit-maximizing Output

The point of production where a company reaches its maximum profit potential.