When considering the economists view of the cost-volume-profit analysis, which one of the following statements is true?Group of answer choicesA. The economist’s view is practicalB. The economist’s view assumes only one break-even pointC. The economist’s view assumes limited availability of price, cost and revenue volume information and linearity over a relevant rangeD. The economist views a whole range of activities
Question
When considering the economists view of the cost-volume-profit analysis, which one of the following statements is true?Group of answer choicesA. The economist’s view is practicalB. The economist’s view assumes only one break-even pointC. The economist’s view assumes limited availability of price, cost and revenue volume information and linearity over a relevant rangeD. The economist views a whole range of activities
Solution
C. The economist’s view assumes limited availability of price, cost and revenue volume information and linearity over a relevant range.
This statement is true because economists often make assumptions to simplify complex business realities and make them easier to model and understand. They often assume that there is limited availability of price, cost, and revenue volume information, and that these variables behave linearly over a relevant range. This means that they assume that costs and revenues change in a straight-line manner as volume changes, which is not always the case in real-world situations.
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