When the Government Chooses to Use Resources to Build a Dam

question 278

Multiple Choice

When the government chooses to use resources to build a dam, these sources are no longer available to build a highway. This choice illustrates the concept of

• A) a market mechanism.
• B) macroeconomics.
• C) opportunity cost.
• D) a fallacy of composition.

---

Definitions:

Overapplied

refers to a situation where the allocated overhead costs exceed the actual overhead costs incurred.

Manufacturing Overhead

All indirect costs associated with manufacturing, excluding direct materials and direct labor, such as maintenance and utilities.

Raw Materials Inventory

The total cost of all the raw materials that are currently stored by a company and ready to be used in production.

Underapplied

Underapplied refers to a situation where the actual manufacturing overheads are more than the overheads applied to products or services based on the predetermined overhead rate.