If the Price of a Depleting Resource Does Not Rise

question 103

Multiple Choice

If the price of a depleting resource does not rise as anticipated, it may be because

• A)the government prohibited the methods to extract the resource.
• B)new methods of mining or refining were developed.
• C)a price floor was passed by law.
• D)firms that distribute the resource cartelized.

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Definitions:

Predetermined Overhead Rate

This is the rate used to allocate manufacturing overhead to individual units of production, calculated in advance based on estimated costs and activity levels.

Fixed Manufacturing Overhead

Indirect manufacturing costs that remain constant regardless of the level of production, such as salaries of supervisors and rent.

Machine-hours

A measure of production time, calculated by the number of hours a machine is operated in the production of goods.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to products, based on a planned level of activity.