A Major Hotel Chain Found That If They Were to Reduce

question 160

Multiple Choice

A major hotel chain found that if they were to reduce the cost of the ice cream they currently served they would be able to save over 400 employees jobs.Therefore,they switched from a high priced brand of ice cream to a more moderate priced ice cream.This is known as the:

• A) substitution effect
• B) income effect
• C) brand effect
• D) commercial effect
• E) value effect

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Definitions:

Variable Input

An input in the production process that changes in quantity with the level of output, such as raw materials or labor hours.

Wage

The fixed regular payment, typically calculated on an hourly, daily, or piecework basis, made by an employer to an employee.

Marginal Product

The additional output that is produced by adding one more unit of a specific input, keeping all other inputs constant.

Profit Maximize

The process by which a company determines the price and output level that returns the greatest profit, taking into account costs and demand.