If the Supply of a Good Decreased, What Would Be

question 167

Multiple Choice

If the supply of a good decreased, what would be the effect on the equilibrium price and quantity?

• A) Price would increase, and quantity would decrease.
• B) Price would decrease, and quantity would decrease.
• C) Price would increase, and quantity would increase.
• D) Price would decrease, and quantity would increase.

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Definitions:

Absorption Costing

A financial recording approach that encompasses all production expenses, such as direct materials, direct labor, and overhead costs, within the price of a product.

Net Operating Income

Income from normal business operations after subtracting operating expenses but before interest and taxes.

Fixed Manufacturing Overhead

Expenses related to manufacturing that remain constant regardless of the level of production, such as building lease payments and equipment depreciation.

Deferred Inventories

Inventory costs that are not expensed in the period they are incurred but are deferred to a future period.