All Else Being Equal, a Negative Supply Shock

question 25

Multiple Choice

All else being equal, a negative supply shock:

• A) causes consumer surplus to increase and producer surplus to decrease.
• B) causes consumer surplus to decrease and producer surplus to increase.
• C) causes both consumer and producer surplus to increase.
• D) causes both consumer and producer surplus to decrease.

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Definitions:

Departmental Contribution

The amount of income earned by a specific department after direct costs associated with the department have been subtracted.

Overhead

The ongoing administrative, general, and maintenance expenses incurred during the production process, not including direct labor or materials costs.

Profit Centers

Parts of an organization that are responsible for generating revenue and evaluated based on their profitability.

Return on Investment

A performance measure used to evaluate the efficiency or profitability of an investment, calculated as net profit divided by the cost of the investment.