A Fall in the Price of a Good Causes Producers

question 246

Multiple Choice

A fall in the price of a good causes producers to reduce the quantity of the good they are willing to produce. This fact illustrates

• A) the nature of an inferior good.
• B) the law of supply.
• C) a change in supply.
• D) the law of demand.

---

Definitions:

Direct Material Quantity Variance

The difference between the budgeted amount of materials needed for production and the actual amount used, expressed in cost or quantity.

Standard Price

The predetermined cost that a company expects to pay for materials, labor, and other inputs, used as a benchmark for variance analysis.

Actual Grams

The real-world measurement of weight for materials used in a production or laboratory setting, as opposed to theoretical or estimated amounts.

Labour Efficiency Variance

The difference between the actual labor hours spent on production and the expected (or standard) labor hours, multiplied by the standard labor rate.