Assume the Market in the Graph Shown with Demand D

question 116

Multiple Choice

Assume the market in the graph shown with demand D and supply S₁ is in equilibrium at a quantity of 5 units.Producer surplus is:

• A) $5.
• B) $10.
• C) $15.
• D) $7.50.

---

Definitions:

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and are considered a variable cost.

Indirect Materials

Materials used in the production process that cannot be directly linked to a specific product, such as lubricants and cleaning supplies used in machinery.

Factory Overhead

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

Direct Labor Costs

The wages of employees who are directly involved in the production of goods or services.