Marginal Utility Theory Predicts That an Increase in Income Means

question 66

Multiple Choice

Marginal utility theory predicts that an increase in income means that the consumption of

• A) all goods will increase.
• B) normal goods will increase and consumption of inferior goods will decrease.
• C) inferior goods will increase and consumption of normal goods will decrease.
• D) None of the above answers is correct.

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Definitions:

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales activity, such as rent and salaries.

Absorption Costing

A financial accounting technique that integrates all costs incurred from manufacturing, including direct materials, direct labor, along with both fixed and variable overhead costs, into the total cost of a product.

Direct Materials

Raw materials that can be directly linked to the production of finished goods in manufacturing.

Fixed Overhead

Fixed Overhead refers to the consistent, non-variable expenses incurred by a business, regardless of its level of production or sales activities.