When the Price of a Pizza Decreases from $12 to $10

question 489

Multiple Choice

When the price of a pizza decreases from $12 to $10, it is definitely the case that the

• A) income effect means people buy less pizza.
• B) substitution effect means people buy more pizza.
• C) quantity demanded of pizza will not change.
• D) None of the above answers is correct.

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Definitions:

Marginal Cost

The increase in total cost that arises from producing one additional unit of a product.

Society's Well-Being

The overall economic and social conditions under which a community or society operates and thrives.

Total Profit Maximization

The process of adjusting output and pricing to achieve the highest possible profit in a business operation.

MB = MC

The optimal condition in economics where the marginal benefit (MB) of an action is equal to its marginal cost (MC), leading to efficient allocation of resources.