Which Is NOT a Correct Statement About the Undesirable Side

question 203

Multiple Choice

Which is NOT a correct statement about the undesirable side effects of a quantity control?

• A) Quantity controls do not lead to deadweight loss.
• B) Some mutually beneficial transactions do not occur because of quantity controls.
• C) Quantity controls provide incentives for illegal activities.
• D) Quantity controls cause a wedge between the demand price and supply price.

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Definitions:

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in the cost of goods sold and treats fixed overhead expenses as period costs.

EBITDA

An acronym for Earnings Before Interest, Taxes, Depreciation, and Amortization, indicating a company's financial performance by measuring its profitability without considering financial, accounting, and tax effects.

Operating Income

The income generated from a company's primary business activities, before subtracting any interest and tax expenses.

Contribution Margin

The difference between the sales revenue of a product and its variable costs, used to cover fixed costs and generate profit.