If Coke and Pepsi Are Close Substitutes, Then If

question 29

Multiple Choice

If Coke and Pepsi are close substitutes, then if:

• A) Coke raises its price, so will Pepsi.
• B) Coke raises its price, it will not lose customers to Pepsi.
• C) Pepsi lowers its price, it will not hurt Coke.
• D) Coke raises its price, some customers will switch to Pepsi.

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Definitions:

Variable Component

Part of a cost or expense that varies directly with the level of activity, production, or sales.

Inspection Cost

Expenses associated with the activity of checking and verifying the quality or standards of products or materials.

Mixed Cost

Mixed cost is an expense that has both fixed and variable components, meaning it changes with the level of activity but also incurs a base cost.

Least-squares Regression

A statistical method used to determine the line of best fit by minimizing the sum of squares of the errors between the observed and predicted values.