If Market Demand Is Inelastic and Supply Is Subject to Severe

question 133

Multiple Choice

If market demand is inelastic and supply is subject to severe shifts from season to season,it follows that

• A)price changes are likely to be small.
• B)price changes are likely to be large.
• C)total revenue is likely to be constant over time.
• D)total revenue is likely to be highly volatile.
• E)b and d

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Definitions:

Incremental Cash Flows

The additional cash flow a new project generates for an organization, which is critical for assessing its viability and profitability.

Opportunity Costs

The price paid for not selecting the next most favorable choice when a decision is made.

Asset Replacement

The process of substituting old assets with new ones to maintain or improve operational efficiency.

Asset Expansion

The process of increasing a company's investment in current and fixed assets to boost its capacity and efficiency.