If a Non-Renewable Resource Is Scarce,has Constant Marginal Cost of Production

question 19

Multiple Choice

If a non-renewable resource is scarce,has constant marginal cost of production and is sold in a competitive market,

• A) its price will increase over time.
• B) its price will exceed marginal cost.
• C) its price will increase by the rate of interest.
• D) All of the above.

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Definitions:

Variable Costing

A costing method that only includes variable production costs in the cost of goods sold and treats fixed overhead as a period expense.

Fixed Overhead

Expenses that do not vary with the level of production or sales, including rent, salaries, and insurance costs.

Period Cost

Costs that are not directly tied to the production process and are instead expensed in the period they are incurred, such as selling, administrative, and other expenses.

Manufacturing Costs

The total expenses involved in making a product, including direct materials, direct labor, and factory overhead.