Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss

question 380

Multiple Choice

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss
-As shown in Exhibit 3A-1, if the market price falls from $2.00 to $1.00, then:

• A) consumer surplus increases.
• B) producer surplus increases.
• C) deadweight loss is eliminated.
• D) all of the above are true.
• E) none of the above are true.

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Definitions:

Labor Quantity Variance

The difference between the actual hours worked and the standard hours allowed for the work performed, multiplied by the standard hourly wage rate.

Produced

The completed output of goods or services as a result of manufacturing or production processes.

Materials Price Variance

The difference between the actual cost of materials used in production and the expected (or standard) cost of those materials.

Direct Materials Quantity Variance

The variance between the real amount of materials consumed in production and the anticipated standard amount, multiplied by the cost per unit according to standards.