The Government Has Been Considering Doing Away with Minting Pennies

question 56

Multiple Choice

The government has been considering doing away with minting pennies because they are rarely used for purchases (with most people collecting them or throwing them away) .How would an economist best explain this?

• A) More people are using credit and debit cards, so they are not in the habit of using monetary change.
• B) Prices have increased over time, and it would take far too many pennies to buy anything of value.
• C) Prices have increased over time, and the opportunity cost of carrying around large quantities of pennies has become too large.
• D) Prices have increased over time, and the opportunity cost of carrying around pennies has fallen.
• E) People who use pennies probably are not spending enough money; removing the penny will force people to spend more.

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Definitions:

Weighted Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory based on the weighted average cost of all units available for sale during the period.

Conversion Activities

Activities in manufacturing that convert raw materials into finished goods.

Weighted Average Method

An inventory valuation method that calculates the cost of goods sold and ending inventory based on the average cost of all inventory items.

Overhead Costs

Indirect costs incurred in the running of a business that cannot be directly attributed to any specific product or service.