In the Following Import Graph, If Horizontal Supply Line S_m

question 32

Multiple Choice

In the following import graph, if horizontal supply line S_m shifts to horizontal line S'_m because of the imposition of a tariff,

• A) the situation must be one of a "large" importing country.
• B) the tariff must be a specific tariff.
• C) the tariff must be an ad valorem tariff.
• D) the tariff can be either a specific or an ad valorem tariff.

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Definitions:

Variable Costing

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

Net Operating Income

The income generated from normal business operations, calculated by deducting operating expenses from gross income.

Absorption Costing

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

Fixed Costs

Costs that remain constant in total regardless of changes in the level of the business activity or production volume.