Suppose the Government Decides to Create a Price Support (Floor)on

question 56

Multiple Choice

Suppose the government decides to create a price support (floor) on the price of corn, which of the following is a true statement?

• A)A binding price support/floor will tend to lower the price of corn for poorer people.
• B)If the government does not buy any wheat, there will tend to be an excess supply of wheat in the marketplace, if the price floor is binding.
• C)A non-binding price support/floor below the equilibrium price in the market will also lead to a rise in the price of corn.
• D)It is likely that the total surplus (consumer surplus plus producer surplus)will rise with a price support program.

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Definitions:

Predetermined Overhead Rate

A rate calculated before a period begins, based on the estimated overhead costs and estimated activity base, used to allocate overhead costs to products or job orders.

Manufacturing Overhead Account

An account that accumulates all indirect manufacturing costs, such as utilities, rent, and salaries for managers.

Underapplied Overhead

A situation where the allocated manufacturing overhead cost is less than the actual overhead cost incurred.

Job Costing

A cost accounting system that accumulates costs for each individual job or project separately.