If the Supply Curve for a Factor Is Perfectly Inelastic,the

question 24

Multiple Choice

If the supply curve for a factor is perfectly inelastic,the payments to the factor are

• A)wholly economic rent.
• B)wholly transfer earnings.
• C)partly economic rent and partly transfer earnings.
• D)neither economic rent nor transfer earnings.
• E)an unnecessary tax on the factor.

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Definitions:

Variable Costing

An accounting method that only includes variable production costs (materials, labor, and overhead) in product costs, excluding fixed overhead.

Direct Labor

Direct labor comprises the labor costs of workers directly involved in the production of goods or services.

Absorption Costing

A costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a unit of product.

Fixed Manufacturing Overhead

Ongoing expenses that do not change in total with the level of production or sales volume, such as salaries, rent, and insurance, associated specifically with the manufacturing process.