A Consumer Will Buy a New Product Rather Than an Existing

question 134

Multiple Choice

A consumer will buy a new product rather than an existing product

• A) when the MU/P of the new product is less than the MU/P of the existing product.
• B) when the substitution of the new product for the old product increases the consumer's total utility.
• C) only if the new product has a lower price than the existing product.
• D) only if the MU of the new product exceeds the MU of the existing product.

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Definitions:

Variable Costing

An accounting method that includes only variable production costs (costs that change with the level of production) in product costs.

Absorption Costing

A financial accounting technique that integrates all production expenses, including direct materials, direct labor, along with all variable and fixed manufacturing overhead costs, into the product's cost.

Variable Production Costs

Costs that vary directly with the level of production output, such as raw materials and labor expenses.

Fixed Production Costs

Payments that stay unchanged regardless of how much is produced or sold, covering rent, salaries, and insurance.