Refer to the Information Provided in Figure 5

question 65

Multiple Choice

Refer to the information provided in Figure 5.6 below to answer the question that follows. Figure 5.6
-Refer to Figure 5.6. The market is initially in equilibrium at the intersection of the demand curve and supply curve S₂. If supply shifts from S₂ to S₁, which of the following statements is true?

• A) Price will still serve as a rationing device causing quantity supplied to exceed 12 pizzas.
• B) There is no need for price to serve as a rationing device in this case because the new equilibrium quantity is less than the original equilibrium quantity.
• C) Price will still serve as a rationing device causing quantity demanded to rise from 10 to 12 pizzas.
• D) The market cannot move to a new equilibrium unless demand shifts at the same time that supply shifts.

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Definitions:

Labor

The work performed by humans that is used in the production of goods and services.

Equivalent Units

Equivalent units, in managerial accounting, are a concept used in process costing that represents the amount of work done during a period in terms of fully completed units of output.

Materials Costs

The expenses associated with the raw materials used in the production of goods.

Work In Process

Inventory that includes all materials, labor, and overhead costs incurred for products that are in the production process.