A Firm Can Sell as Much as It Wants at a Constant

question 164

Multiple Choice

A firm can sell as much as it wants at a constant price. Demand is thus

• A) perfectly inelastic.
• B) perfectly elastic.
• C) relatively inelastic.
• D) relatively elastic.

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Definitions:

IRR

The interest rate that results in a net present value of zero for all cash flows associated with a specific project.

Break-Even Point

The level of sales at which total revenues equal total costs, resulting in no profit or loss.

Sales

The total income received from selling goods or services over a specific period of time.

DOL

Degree of Operating Leverage, a ratio that measures how sensitive a company’s operating income is to a change in its sales, indicating the volatility of earnings.