Patrick Lives near Two Gas Stations,Exxon and Shell

question 253

Multiple Choice

Patrick lives near two gas stations,Exxon and Shell.If Exxon decreases the price of gas,we predict that the quantity of gasoline demanded at Shell will

• A) decrease because Exxon and Shell gas are complements.
• B) decrease because Exxon and Shell gas are substitutes.
• C) increase because Exxon and Shell gas are substitutes.
• D) increase because Exxon and Shell gas are complements.
• E) not change Exxon and Shell are different brands of gasoline.

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Definitions:

Fixed Overhead

Refers to the total of all indirect costs that remain constant regardless of the level of production or business activity.

Absorption Costing

Absorption Costing is an accounting method that includes all of the manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.

Variable Overhead

Costs that fluctuate with production volume, such as utilities or materials used in production.

Variable Costing

A costing method that includes variable manufacturing costs—direct materials, labor, and variable overhead—in the cost of production.