Table 7-5 For Each of Three Potential Buyers of Oranges, the Table

question 130

Multiple Choice

Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day.
-Refer to Table 7-5. Which of the following statements is correct?

• A)Neither Bob's consumer surplus nor Charisse's consumer surplus can exceed Allison's consumer surplus, for any price of an orange.
• B)All three individuals will buy at least one orange only if the price of an orange is less than $0.25.
• C)If the price of an orange is $0.60, then consumer surplus is $4.90.
• D)All of the above are correct.

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Definitions:

Absorption Costing

A method of accounting that encompasses the total manufacturing expenses – encompassing direct materials, direct labor, as well as both variable and fixed overhead costs – within the product's cost.

Variable Costing

An accounting method that only considers variable costs in product pricing and decision making.

Fixed Overhead Expensed

The practice of charging fixed overhead costs to the income statement in the period they are incurred, rather than allocating them to products.

Inventories

Properties or goods meant for selling in regular business activities, under production for sale, or as resources and supplies for consumption during the production phase or while delivering services.