A Shift in Demand for a Given Factor of Production

question 206

Multiple Choice

A shift in demand for a given factor of production will not occur if:

• A)the price of that factor falls.
• B)the productivity of that factor increases.
• C)the productivity of that factor decreases.
• D)there is a decrease in the price of a substitute factor.

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Definitions:

Direct Materials Costs

The expenses for raw materials that are directly used in the manufacturing of a product.

Variable Costing

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

Unit Product Cost

The calculated cost to produce one unit of a product, including direct materials, labor, and overhead.

Contribution Margin

The amount remaining from sales revenue after variable costs have been deducted, indicating how much contributes to covering fixed costs and generating profit.