A Company That Produces and Sells a Single Product Has

question 29

Multiple Choice

A company that produces and sells a single product has provided the following volume and average cost data for two accounting periods: The best estimates of the total fixed cost and variable cost per unit are closest to:

• A)$2,000 fixed;$1.50 variable
• B)$2,000 fixed;$7.00 variable
• C)$3,000 fixed;$7.00 variable
• D)$3,000 fixed;$8.50 variable

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Definitions:

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually pay.

Complementary Goods

Products or services that are typically consumed together, where the demand for one increases the demand for the other.

Inelastic

Describing demand that changes little with price fluctuations; consumers’ buying habits are not significantly affected by price changes.

Price Elasticity

The measure of how much the quantity demanded of a good responds to a change in the price of that good, demonstrating the sensitivity of consumers to price changes.