The Supply Curve of Books (Which Are Produced Using Paper

question 5

Multiple Choice

The supply curve of books (which are produced using paper made from trees) will shift to the right in response to

• A)a decline in college tuition.
• B)an increase in home building.
• C)a reduction in the supply of lumberjacks.
• D)removal of government regulations that limit timber harvests from national forests.

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Definitions:

Prime Cost

The combined direct costs of raw material and labor that are directly associated with the production of a product.

Discretionary Fixed Costs

Those fixed costs that arise from annual decisions by management to spend on certain fixed cost items, such as advertising and research.

Committed Fixed Costs

Expenses that a company has to pay regardless of its level of production or sales, such as leases and long-term contracts, which cannot be easily changed in the short term.

Unit Fixed Cost

The fixed cost associated with producing one unit of a product, which does not vary with the level of production output.