Data on After-Tax Income and Consumption Spending for the Adam

question 132

Multiple Choice

Data on after-tax income and consumption spending for the Adam Smith family are given below: Based on these data, the Adam Smith family has a marginal propensity to consume equal to:

• A) 0.9.
• B) 0.8.
• C) 0.75.
• D) 0.6.

---

Definitions:

Manufacturing

The process of converting raw materials, components, or parts into finished goods that meet a customer's expectations or specifications.

Factory Rent

Expenses incurred for leasing a premises to use as a manufacturing or production facility.

Prime Costs

The combined direct costs of raw materials and labor that are directly attributable to the production of a product.

Conversion Costs

The sum of direct labor and overhead costs involved in converting raw materials into finished goods.