Refer to the Above Graph

question 148

Multiple Choice

Refer to the above graph.What will shift D₁ to D₂?

• A) An increase in the price of a substitute input (if the output effect is greater than the substitution effect)
• B) An increase in the price of a substitute input (if the substitution effect is greater than the output effect)
• C) A decrease in the price of a substitute input (if the substitution effect is greater than the output effect)
• D) An increase in the price of a complementary resource

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Definitions:

Break-Even Point

The break-even point is the point at which total costs and total revenue are equal, resulting in no net loss or gain, and is used for analyzing the financial viability of a product or service.

Pretax Income

The amount of income earned by a business before the deduction of taxes; it is found by subtracting all expenses, except tax expenses, from revenues.

Variable Cost

Variable cost refers to expenses that vary directly with the level of production output or sales volume, such as materials and labor.

Fixed Cost

Costs that do not change with the level of output produced, such as rent, salaries, and insurance.