What Would Happen to the Equilibrium Price and Quantity of Lattés

question 194

Multiple Choice

What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that reduced the amount of labor necessary to produce them?

• A)Both the equilibrium price and quantity would increase.
• B)Both the equilibrium price and quantity would decrease.
• C)The equilibrium price would increase, and the equilibrium quantity would decrease.
• D)The equilibrium price would decrease, and the equilibrium quantity would increase.

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Definitions:

First-In, First-Out

An inventory valuation method where the oldest stock is sold first.

Grinding Department

A specific section in a manufacturing process where grinding operations (material removal process) are performed.

Conversion Costs

Conversion costs are the costs required to convert raw materials into finished products. They include direct labor and manufacturing overhead, excluding the cost of raw materials.

Equivalent Units

Equivalent units are used in cost accounting to represent a portion of unfinished goods in a way that can be compared to complete units, facilitating the process of costing inventory.