If a Supplier Faces a Perfectly Horizontal Demand Curve and Sets

question 268

Multiple Choice

If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect:

• A) no change in his total revenues.
• B) everyone to begin buying his product.
• C) a complete loss of revenues.
• D) a new demand curve.
• E) a relative increase in income.

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Definitions:

Cost of Goods Sold

The direct costs tied to the production of products sold by a company, including material and labor expenses.

Average Costs

The cost per unit calculated by dividing the total costs of production by the number of units produced.

Perpetual FIFO

An inventory management method where goods are sold in the order they are acquired, continuously updated to reflect sales and purchases.

Cost of Goods Sold

An accounting term referring to the direct costs attributable to the production of the goods sold in a company, including material and labor costs.