Nathan and Carla Are Members of the Buying Center for Bonny

question 69

Multiple Choice

Nathan and Carla are members of the buying center for Bonny Bakes who are attending a sales presentation for a new ad campaign.During the meeting,Nathan says,"Carla,if instead of spending the $20,000 you're asking us to put into this new advertising idea,we put that money in a new packaging machine to replace the one in the Cartersville plant,we'll save $3,500 annually in maintenance and utility costs." Nathan is basing this objection on:

• A) sunk costs.
• B) variable costs.
• C) opportunity costs.
• D) fixed costs.
• E) total costs.

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Definitions:

Income Effect

The change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.

Opportunity Cost

The lost potential gain from other alternatives when one alternative is chosen.

Income Effects

The changes in an individual's or economy's income and how that changes their spending and saving behavior.

Substitution Effects

The change in consumption patterns due to a change in the relative prices of goods.