A Firm with High Operating Leverage Is Expected To

question 36

Multiple Choice

A firm with high operating leverage is expected to:

• A) have high variable costs.
• B) have low fixed costs.
• C) have a high degree of profitability.
• D) perform particularly well when sales are high.

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Definitions:

Perfect Complements

Goods that are consumed together in fixed proportions to fulfill a specific utility.

Convex Preferences

A set of consumer preferences that exhibit a specific property where mixtures of goods are preferred over singular extremes, displaying a curve outward towards the origin on a utility graph.

Weakly Convex

Describes a curve or set in geometry and mathematical functions that bulges outward less sharply than a perfectly convex shape, often applied in optimization problems.

Convex Preferences

A representation in economics of a consumer preference structure where a mix or combination of two goods is preferred over either of the two goods alone, indicating a desire for diversification.