The Quantity of Shoes Produced Is Measured Along the X-Axis

question 4

Multiple Choice

The quantity of shoes produced is measured along the x-axis of a bowed-outward production possibilities frontier and the quantity of shirts produced is measured along the y-axis. As you move down towards the right along the production possibilities frontier, the marginal cost of

• A)a pair of shoes decreases.
• B)a pair of shoes increases.
• C)a shirt remains constant.
• D)a shirt increases or decreases but we don't know for sure.
• E)a pair of shoes and a shirt is equal at the midpoint between the x-axis and the y-axis.

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Definitions:

Fixed Manufacturing Costs

Expenses that do not change with the level of production, including things like rent for factory space and salaries of permanent staff.

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.

Product Costs

All costs that are involved in acquiring or making a product. In the case of manufactured goods, these costs consist of direct materials, direct labor, and manufacturing overhead. Also see Inventoriable costs.

Manufacturing Costs

Expenses directly related to the production of goods, including direct materials, direct labor, and manufacturing overhead.