Duo,IncCarries Two Products and Has the Following Year-End Income Statement

question 90

Multiple Choice

Duo,Inc.carries two products and has the following year-end income statement (000s omitted) :
If products AR-10 and ZR-7 are substitutes for each other,a sales mix and sales volume variation for the combined products can be calculated.If this combination is calculated,the net effect on profit of the change in the unit sales mix is (round intermediate calculation to five significant digits and final answer to whole dollar) :

• A)$480 favorable.
• B)$700 favorable.
• C)$560 favorable.
• D)$940 favorable.
• E)$1,960 favorable.

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Definitions:

Marginal Utility

The additional satisfaction or benefit (utility) that a consumer derives from consuming one more unit of a good or service.

Optimum

The most favorable condition or highest achievable level of efficiency under the given circumstances.

Indifference Curves

Graphical representations in economics that show combinations of goods among which a consumer is indifferent.

Upward-sloping

A term used in economics to describe a curve that represents an increase in one variable as another variable increases, often used in the context of supply curves.