The More Price Elastic the Demand Curve, the More a Competitive

question 10

True/False

The more price elastic the demand curve, the more a competitive market will over-produce (relative to the efficient level) in the presence of a negative externality.

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Definitions:

Contribution Format Income Statement

An income statement format that separates fixed costs from variable costs, thus showing the contribution margin.

Degree of Operating Leverage

A financial ratio that measures the sensitivity of a company's operating income to its sales, indicating how revenue growth translates into growth in operating income.

Variable Expenses

Costs that change in proportion to the level of business activity or production volume.

Fixed Expenses

Costs that do not fluctuate with changes in production level or sales volume, remaining constant over a period.