What Is Likely to Happen If a Producer Incorrectly Sets

question 6

Multiple Choice

What is likely to happen if a producer incorrectly sets the price of its product too low?

• A) A shortage (excess demand) will result, and consumers will bid the price down to equilibrium.
• B) A surplus (excess supply) will result, and the additional goods in inventory will prompt the producer to raise the price.
• C) A shortage (excess demand) will result, and consumers will bid the price up to equilibrium.
• D) A surplus (excess supply) will result, and the additional goods in inventory will prompt the producer to restrict output until sales increase.

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Definitions:

Time-Driven

A method or model that assigns resource costs based on the actual time units consumed by an activity or process.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to related products and services based on their use of resources.

Preparing Deliveries

The process involved in getting goods ready to be dispatched to the customer, including packing and labeling.

Activity-Based Costing

An accounting method that assigns costs to products and services based on the activities and resources that go into producing them.