If a Firm Expects That the Price of Its Product

question 57

Multiple Choice

If a firm expects that the price of its product will be higher in the future than it is today

• A) the firm will go out of business.
• B) the firm has an incentive to increase supply now and decrease supply in the future.
• C) the firm has an incentive to decrease quantity supplied now and increase quantity supplied in the future.
• D) the firm has an incentive to decrease supply now and increase supply in the future.

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Definitions:

Predetermined Overhead Rate

A rate used to apply manufacturing overhead to products or job orders, calculated before the period begins based on estimated costs and activity levels.

Direct Labor-Hours

Overall work duration of employees directly involved in the production process.

Machine-Hours

A measure of production time that indicates the total hours a machine is in operation during a specific period.

Forming Department

A segment within a manufacturing facility where raw materials are shaped and formed into products.