Suppose Bev's Bags makes two kinds of handbags-large and small. Bev rents an industrial space where she keeps the fabric, the industrial sewing machine, her measuring board and cutting shears, extra needles, thread and buttons, and labels. If Bev were to produce no bags, which of the following is true regarding Bev's costs?
A. The variable cost of fabric would drop to zero.
B. The variable cost of cutting shears would drop to zero.
C. The fixed cost of thread would stay the same.
D. All of these are true.
Answer: A
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The crude quantity theory of money and the sophisticated quantity theory of money are approximately similar
A. in times of deflation. B. in times of high unemployment. C. in times of full employment. D. in no set of circumstances.
The statement that “repaying our enormous national debt will ruin the nation” is
A. true, because taxes will have to go up by such large amounts that American citizens will have very little income to live on. B. true, because most of our national debt is owed to foreigners. C. false, because the government will take emergency measures to prevent national bankruptcy. D. false, because each time the principal on the debt comes due, the U.S. Treasury rolls it over by issuing more debt.
Suppose that the income elasticity of demand for frozen dinners is negative. Other things being equal, which of the following statements is incorrect?
A. Frozen dinners are an inferior good. B. The quantity demanded of frozen dinners increases as a consumer's income declines. C. There exists a negative relationship between income and the demand for frozen dinners. D. The share of income spent on frozen dinners must decrease as a consumer's income decreases.
If demand is elastic and the price of a product decreases by 100 percent, then
A) the change in quantity demanded is less than 100 percent. B) the change in quantity demanded is equal to 100 percent. C) the change in quantity demanded is greater than 100 percent. D) the decrease in quantity demanded is greater than 0 percent.