Suppose There Is a Reduction in the Price of Food

question 4

Multiple Choice

Suppose there is a reduction in the price of food while consumers' income and the price of non-food stay the same,which of the following statement is true?

• A) spending on food consumption will always increase.
• B) budget line will rotate out from the endpoint on the axis of food.
• C) budget line will rotate out from the endpoint on the axis of non-food.
• D) the slope of the budget line will stay the same.

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Definitions:

Average Total Cost

The total cost of production divided by the total quantity produced, including both fixed and variable costs.

Average Variable Cost

The total variable costs (costs that change with the level of output) divided by the quantity of output produced.

Losing Money

The process where expenses exceed revenues, resulting in financial loss for a business or individual.

Shutdown

The process of ceasing operations, either temporarily or permanently, often as a result of economic difficulties or strategic business decisions.