What is the effect of falling gold prices on ABC's revenues?

• A. It would increase the quantity of gold recovered.
• B. It would decrease the price at which gold is sold.
• C. It would reduce income ABC receives from each kilogram of recovered gold.
• D. It would have no impact on revenues.

Answer: (C)

Revenue from gold is calculated by multiplying the price per kilogram by the quantity recovered. When prices fall, the revenue earned for each kilogram drops. If ABC continues to recover the same amount of gold, total revenue will decrease because the income per kilogram is lower. So the direct impact is a reduction in income per kilogram of recovered gold. The other ideas either assume a change in quantity without that being stated, imply no effect, or focus on the price change itself rather than its direct effect on revenue.