In Some Recent Past Years, Prices of Basic Food Commodities

question 80

Multiple Choice

In some recent past years, prices of basic food commodities such as corn, rice, and wheat have increased sharply. Chinese authorities were concerned that escalating prices would cause inflation and be followed by civil unrest.
-If the Chinese government sets a price ceiling below the equilibrium price, the result will be to

• A) increase total surplus.
• B) create deadweight loss.
• C) increase surplus and create deadweight loss.
• D) eliminate deadweight loss.

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Definitions:

Direct Materials Used

Direct Materials Used are the raw materials that are directly incorporated into a finished product in the manufacturing process, constituting a significant part of the production cost.

Actual Overhead

The real costs incurred in the running of a business, excluding direct labor and direct materials.

Direct Materials Costs

The expense of raw materials and components that are directly incorporated into a finished product.

Manufacturing Overhead Applied

The allocation of estimated manufacturing overhead to individual jobs or products based on a predetermined overhead rate.