Policymakers Are Discussing Various Proposals Regarding How to Deal with Natural

question 214

Multiple Choice

Policymakers are discussing various proposals regarding how to deal with natural monopolies.Senator Huff wants to regulate natural monopolies by equating price with average total cost.Huff contends that such a policy will ensure that monopolies make every effort to reduce costs.Senator Puff wants the government to own natural monopolies.Puff argues that government-owned monopolies usually do a better job of holding down costs than privately owned monopolies.Which senator's argument is correct?

• A)Senator Huff
• B)Senator Puff
• C)Both Senators
• D)Neither Senator

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Definitions:

Conversion Costs

The combination of direct labor and factory overhead costs; in lean accounting, the account in which is accumulated the costs of direct labor and factory overhead.

Manufacturing Overhead Control

This involves managing and recording all indirect production costs associated with manufacturing operations, including utilities, maintenance, and equipment depreciation.

Backflush Accounting

A simplification of the accounting system by eliminating the accumulation and transfer of product costs by departments (intermediate departmental work in process accounts), but instead pulls the material and conversion costs directly to finished goods.

Work in Process Inventories

Items in various stages of production but not yet completed, representing a component of a manufacturer's inventory.