-How Much Is the Average Propensity to Consume When Disposable

question 273

Multiple Choice

$$\begin{array}{l}\text { Disposable Income Consumption }\\\begin{array} { c c } 0 & \$ 1 \text { trillion } \\\$ 1 \text { trillion } & 1.5 \text { trillion } \\2 \text { trillion } & 2.0 \text { trillion } \\3 \text { trillion } & 2.5 \text { trillion } \\4 \text { trillion } & 3.0 \text { trillion }\end{array}\end{array}$$
-How much is the average propensity to consume when disposable income is $2 trillion?

• A).25
• B).5
• C).75
• D)1.0
• E)1.25

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Definitions:

Absorption Costing

An accounting technique that integrates all costs associated with production, including direct materials, direct labor, and variable and fixed overhead costs, into the cost of a product.

Profit

The financial gain realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Loss

The negative result from operations or other transactions when costs and expenses exceed revenues.

Unit Product Cost

The total cost (including materials, labor, and overhead) to produce a single unit of product.