Related to the Economics in Practice on Page 109: Frank

question 8

Multiple Choice

Related to the Economics in Practice on page 109: Frank runs a corner delicatessen and one day decides to raise his prices by 10 percent. Total revenue is likely to ________ at the end of the first month of the higher prices since demand is relatively elastic in the ________ term.

• A) rise; short
• B) fall; short
• C) rise; long
• D) fall; long

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Definitions:

Cost Control

The process of monitoring and managing the expenses of a business to adhere to a budget or increase profitability.

Flexible Budget Cost Variance

The difference between actual costs and the costs allocated in the flexible budget, which adjusts based on actual levels of activity.

Quantity Variance

A variance that is computed by taking the difference between the actual quantity of the input used and the amount of the input that should have been used for the actual level of output and multiplying the result by the standard price of the input.

Price Variance

The difference between the actual cost of a good or service and its budgeted or standard cost.