If the Demand for a Product in an Increasing Cost

question 159

Multiple Choice

If the demand for a product in an increasing cost perfectly competitive industry decreases, we would expect that price in the long run would ________ and the number of firms in the market would ________.

• A) decrease; decrease
• B) increase; increase
• C) decrease; increase
• D) increase; decrease

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Definitions:

Sales Mix

Sales mix refers to the combination of different products or services that a company sells, impacting the overall profitability depending on the profit margin of each product or service.

Variable Expenses

Expenses that fluctuate with the level of output or activity, in contrast to fixed expenses that remain constant regardless of activity level.

Net Operating Income

The earnings a business retains after subtracting operational costs, prior to the deduction of interest and taxes.

Total Contribution Margin

The difference between a company's sales revenue and variable costs, representing the amount available to cover fixed costs and contribute to profit.