If the Price of Wireless Phone Service Decreases and the Demand

question 142

Multiple Choice

If the price of wireless phone service decreases and the demand for wired phone services decreases, then wired and wireless phone services are

• A) substitutes.
• B) complements.
• C) inferior goods.
• D) elastic goods.

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales over a short period, such as rent, salaries, and insurance.

Estimated Activity

The projected level of activity used to allocate overhead costs, often based on metrics such as machine hours or labor hours.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead to products based on a relevant activity base.

Direct Labor-Hours

The total hours worked by employees directly involved in the production of goods.