If the Price of a Slice of Pizza Falls from $2

question 87

Multiple Choice

If the price of a slice of pizza falls from $2 to $1, a pizza-loving consumer will

• A) see her purchasing power fall.
• B) see her purchasing power rise.
• C) substitute more Chinese food for pizza.
• D) spend more on soft drinks and less on pizza.

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Definitions:

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, providing a measure of performance beyond accounting profit.

Accounting Profits

The net income for a company calculated by subtracting total expenses from total revenues, according to standard accounting practices.

Explicit Costs

Direct, out-of-pocket payments for inputs or resources used in the production of goods or services.

Uninsurable Risk

An eventuality for which the frequency or magnitude of potential losses is unpredictable or unknowable. Insurance companies are not willing to sell insurance against such risks.