If the Demand for a Good Is Price Elastic in Comparison

question 236

Multiple Choice

If the demand for a good is price elastic in comparison to one that is price inelastic, then:

• A) a higher per-unit sales tax will generate more tax revenue.
• B) a higher per-unit sales tax will generate less tax revenue.
• C) changes in total per-unit sales tax revenue brought about by a price change go in the same direction as the price change.
• D) none of the above is true.

Understand the concept and calculation of the margin of safety.

Evaluate the effects of changes in sales, costs, and prices on a company's break-even point and profitability.

Apply the concept of operating leverage and its impact on a company's financial risk.

Understand the concept of break-even analysis and its application in business decision making.

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Definitions:

Karst Terrain

A landscape formed from the dissolution of soluble rocks such as limestone, dolomite, and gypsum, characterized by underground drainage systems with sinkholes, caves, and springs.

Evaporite Rocks

Sedimentary rocks formed by the precipitation of minerals from evaporating water, typically found in arid environments.

Limestone

Limestone is a sedimentary rock composed mainly of calcium carbonate, used in the construction industry and for producing lime, cement, and other materials.

Ambrosia

In mythology, the food or drink of the gods, often depicted as conferring immortality; in the modern context, it can refer to something extremely pleasing to taste or smell.