If There Is a Surplus of a Good, Sellers Will

question 26

Multiple Choice

If there is a surplus of a good, sellers will:

• A) lower the price in order to increase quantity demanded.
• B) raise the price in order to decrease quantity demanded.
• C) compete with buyers.
• D) know that the buyers overvalue the good.

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Definitions:

Margin Of Safety

The excess of budgeted or actual dollar sales over the break-even dollar sales.

Margin Of Safety Percentage

A financial ratio that measures the difference between actual or projected sales and the break-even point, expressed as a percentage of sales.

Contribution Margin

The amount remaining from sales revenue after variable production costs are deducted, contributing to covering fixed costs and generating profit.

High-Low Method

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