Assume the Cost of Certain Inputs Used to Produce Artificial

question 23

Multiple Choice

Assume the cost of certain inputs used to produce artificial Christmas trees increases and,at the same time,the economy moves into a recession,causing the incomes of consumers to decrease.Which of the following will happen to the equilibrium price and quantity of artificial Christmas trees? (Assume artificial Christmas trees are normal goods.)

• A)Price will increase; quantity cannot be determined.
• B)Price will decrease; quantity cannot be determined.
• C)Quantity will increase; price cannot be determined.
• D)Quantity will decrease; price cannot be determined.

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Definitions:

Amortized

The gradual reduction of a debt over a specified period of time by making regular payments of principal and interest.

Fair Value

A measure of the worth of an asset or liability, based on its current market price or the price it would fetch in an orderly transaction at the measurement date.

Controlling Interest

The ownership of a majority of a firm's stock, giving the shareholder the ability to control decisions and operations.

Amortized

The process of gradually paying off a debt or reducing the value of an intangible asset through regular payments over a set period.