Use the Figure Below to Answer the Following Question(s)

question 197

Multiple Choice

Use the figure below to answer the following question(s) .
Figure 6-2
-Figure 6-2 illustrates the four possibilities of the structure of production and consumption for a good or service. When the structure of production and consumption for a good places it in quadrant B,

• A) consumers have little incentive to search out and patronize low-cost suppliers.
• B) private producers of such goods will have little incentive to operate efficiently and to keep prices low.
• C) goods and services will only be supplied if consumers are willing to pay an amount sufficient to cover their production costs.
• D) both a and b, but not c, will be true.

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Definitions:

Cash Payback Period

The duration of time it takes for an investment to generate cash flows sufficient to recover the initial investment cost.

Factory Overhead

All manufacturing costs that are not directly associated with the cost of raw materials or direct labor, often including costs related to maintaining factory operations.

Direct Materials

Raw materials directly used in the manufacturing process of a product, easily traceable and integral to the finished good.

Direct Labor

The wages and other costs for labor that is directly involved in the manufacturing or production of goods or services.