3 Output, Price, and Profit in the Short Run

question 397

Multiple Choice

3 Output, Price, and Profit in the Short Run
-If there are 1,000 rutabaga farms, all perfectly competitive, an increase in the price of fertilizer used for growing rutabagas will

• A) have no effect on the total quantity of rutabagas supplied, because no farm has enough market power to raise the price.
• B) have no effect on the total quantity of rutabagas supplied, because each farm's supply curve is a vertical line.
• C) decrease the total quantity of rutabagas supplied, because each farm's supply curve shifts leftward.
• D) reduce the total quantity of rutabagas supplied, because each farm's supply curve is a horizontal line and will shift upward.

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Definitions:

Overhead Rate

A measure used to calculate how much overhead cost should be allocated to each unit of production, often based on direct labor hours or machine hours.

Assembly Department

A division within a manufacturing facility where parts are put together to form a finished product.

Machine-Hours

A measure used in costing to allocate expenses based on the number of hours a machine is operated.

Manufacturing Departments

Specific sections within a manufacturing company, each focusing on different aspects of the production process.