Exhibit 5-7 -Between Points B and C in Exhibit 5-7, Price Decreases

question 228

Multiple Choice

Exhibit 5-7
-Between points b and c in Exhibit 5-7, price decreases by $1, quantity demanded increases by 10,

• A) total revenue decreases by $1, and demand is elastic
• B) total revenue decreases by $1, and demand is inelastic
• C) total revenue increases by $40, and demand is elastic
• D) total revenue increases by $40, and demand is inelastic
• E) and total revenue increases by $80

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Definitions:

Mixed Cost

A cost that contains both variable and fixed cost elements and changes in total with the level of activity, but not proportionately.

Maintenance Cost

Expenses incurred to keep property, equipment, or assets in effective operating condition.

Machine Hour

A measure of production time, representing the time a machine is operated to perform work.

High-low Method

A technique used in managerial accounting to estimate fixed and variable costs based on the highest and lowest levels of activity.