Which Statements Are TRUE

question 124

Multiple Choice

Which statements are TRUE?
I. A high price for a good encourages consumers to economize on its use, seeking out alternatives.
II. Rising prices give firms the incentive to bring more goods to the market.
III. Firms that experience rising input prices will seek out substitute inputs and develop production technologies to conserve on the costly input.

• A) I only
• B) I and II
• C) II only
• D) I, II, and III

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Definitions:

Average Variable Cost

Average Variable Cost is the variable cost per unit of output, calculated by dividing total variable costs by total output, illustrating how variable costs change with output levels.

Output

The total amount of goods or services produced by a person, machine, factory, country, etc., within a particular time period.

Marginal Product

The additional output generated by employing one more unit of a factor of production.

Output Level

The total quantity of goods and services that a firm or industry produces over a set period.