Alice Says That She Would Buy One Banana Split a Day

question 120

Multiple Choice

Alice says that she would buy one banana split a day regardless of the price. If this is the case:

• A) Alice's demand for banana splits is perfectly inelastic
• B) Alice's price elasticity of demand for banana splits is one
• C) Alice's income elasticity of demand for banana splits is negative
• D) none of the above answers is correct

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Definitions:

Variable Input

A production factor that can be adjusted in the short term to change the level of output, such as labor or raw materials.

Fixed Costs

Costs that do not change with the level of output produced by a firm, such as rent, salaries, and equipment costs.

Average Total Cost Curve

A graphical representation of the total cost per unit of output, calculated by dividing the total cost by the quantity of output produced.

Diminishing Marginal Returns

A principle stating that as more of a variable input is added to a fixed input, the additional output from each new unit of input will eventually decrease.