Which of the Following Is True

question 42

Multiple Choice

Which of the following is true?

• A)A lower price will increase your consumer surplus by the amount you were buying originally, times the reduction in the price.
• B)A lower price will leave unchanged your consumer surplus for each of the units you were already consuming, but will increase consumer surplus from increased purchases at the lower price.
• C)A lower price will decrease your producer surplus for each of the units you were producing, but will not change producer surplus by changing the quantity sold.
• D)A lower price will leave unchanged your producer surplus for each of the units you were producing, but will decrease producer surplus from decreased sales at the lower price.
• E)None of the above is true.

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Definitions:

Profit Margin

represents the percentage of revenue that remains as profit after all operating expenses, taxes, and costs have been deducted from total sales.

Investment Turnover

A ratio that measures how effectively a company generates sales or revenue from its investment in assets.

Return On Investment

A measure used to evaluate the efficiency or profitability of an investment relative to its cost.

Activity Base

A measure or factor used for allocating costs to activities, typically driving the amount of expense incurred in producing a product or providing a service.