All of the Following Statements Are Correct Except

question 27

Multiple Choice

All of the following statements are correct except

• A)if the price of oil is expected to rise at a rate equal to the interest rate,demand increases and supply increases.
• B)the interest rate is the opportunity cost of holding an oil inventory.
• C)if the price of oil is expected to rise at a rate that exceeds the interest rate,demand increases and supply decreases.
• D)according to the Hotelling Principle,the price of a nonrenewable natural resource is expected to rise at a rate equal to the interest rate.
• E)the marginal cost of extraction of oil is the fundamental determinant of supply.

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Definitions:

Weighted-Average Inventory Method

An inventory costing method that assigns a cost to inventory and cost of goods sold based on the average cost of all similar items in inventory.

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed goods, converting them into full units of output for reporting purposes.

Work in Process Inventory

Items that are partway through their manufacturing process but have not yet reached their final form.

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed goods, measured in terms of the amount of finished goods those partial items represent.