When a Shortage Occurs in the Market for a Good

question 19

Multiple Choice

When a shortage occurs in the market for a good, quantity

• A)demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption.
• B)supplied exceeds quantity demanded and the price falls, which encourages more production and less consumption.
• C)demanded exceeds quantity supplied and the market mechanism pushes the price down, which encourages more production and less consumption.
• D)supplied exceeds quantity demanded and the price rises, which encourages more production and less consumption.

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Definitions:

Variable Factory Overhead

Costs in a factory that vary with the level of production output, such as supplies and utilities used in the manufacturing process.

Transfer Pricing

The setting of prices for transactions between affiliated entities within the same multinational corporation, affecting taxation and financial reporting.

Factory Overhead

All indirect costs associated with manufacturing, such as utilities, rent, and maintenance, excluding direct materials and direct labor.

Cost-Reimbursement Contract

A type of contract where the purchaser agrees to pay the supplier for all actual costs incurred plus a fee or profit.