Assume That a Unit of Output Is the Cost Object

question 20

Multiple Choice

Assume that a unit of output is the cost object. Which of the following statements is valid?

• A) Royalties paid on per unit basis are an example of an indirect expense.
• B) Materials consumed in the maintenance of machinery used to manufacture several different products are an example of a direct material cost.
• C) The salaries of supervisors who oversee the manufacture of several different products are an example of a direct labour cost.
• D) Rent paid for a factory in which several different products are produced is an example of an indirect expense.

Comprehend the economic rationale for and against free trade and the various barriers to trade.

Recognize the economic and non-economic benefits of international trade.

Understand the mechanisms through which trade affects national economies and global competitiveness.

Understand the basic principles of international trade and its economic effects on nations.

---

Definitions:

Income Effect

The income effect describes the change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.

Normal Good

A type of good for which demand increases as the income of the consumer increases, holding all else constant.

Wealth Effect

The change in spending and consumption patterns by individuals or households due to changes in their real or perceived wealth.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute away from more expensive goods towards cheaper ones.