When Materials and Supplies Are Used in a Production Facility

question 95

Multiple Choice

When materials and supplies are used in a production facility to assemble and finish a product that will be sold to customers, the usage of the materials and supplies is described as:

• A) Cost incurrence
• B) Locked-in cost
• C) Opportunity cost
• D) Designed-in cost

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Definitions:

Marginal Benefit

The boost in satisfaction or utility received from consuming one more unit of a good or service.

Efficiency Loss

The reduction in economic efficiency due to factors like market distortions, resulting in resources not being allocated optimally.

Deadweight Loss

refers to the loss of economic efficiency that can occur when the equilibrium for a good or service is not achieved, leading to a reduction in total societal welfare.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, representing the benefit to consumers.