A flexible budget: Multiple Choice is both preferred over a static budget in the evaluation of performance and can be used to compare actual and budgeted costs at various levels of activity. gives management flexibility in terms of meeting budget goals. parallels a static budget with respect to format and advantages of use. can be used to compare actual and budgeted costs at various levels of activity.

When used-car dealers signal the quality of a used car with a warranty, a. buyers believe the signal because the cost of a false signal is high b. it is not rational to believe the signal because some used-car dealers are crooked c. the demand for lemons is eliminated d. the price of a lemon rises above the price of a good used car because warranty costs on lemons are greater than warranty costs on good used cars