If a Producer Knew His Product to Be an Inferior

question 136

Multiple Choice

If a producer knew his product to be an inferior good and he also knew average household income was falling,he might

• A)decrease output because the demand for his product would rise.
• B)increase output because the demand for his product would rise.
• C)keep his output the same.
• D)cut output immediately because the demand for his product would surely fall.
• E)close down,because inferior goods are the first to be eliminated from household budgets when income falls.

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Definitions:

Lease Liability

An obligation representing the present value of future lease payments under a leasing agreement.

Present Value

The current valuation of a future sum or ongoing cash flows, given a specified rate of interest.

Sales-type Lease

A lease agreement where the lessor recognizes immediate profits on the sale of an asset while retaining its ownership.

Interest Revenue

Income that a company receives from its investments in bonds, loans, or other instruments that earn interest.