Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss

question 121

Multiple Choice

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss
-As shown in Exhibit 3A-2, if the market price falls from P₂ to P₃, then:

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

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Definitions:

Process Costing

An accounting method used to allocate costs to units of product in processes where the products are indistinguishable from each other, such as in chemical processing or food production.

Conversion Costs

The total of direct labor costs plus manufacturing overhead costs, indicating the expenditures involved in transforming raw materials into completed products.

Materials Costs

The expense incurred for raw materials that are transformed into finished products in the manufacturing process.

Equivalent Units

A term in process costing used to convert partially completed units into a number of complete units for costing purposes.