Along a Short-Run Aggregate Supply Curve, a Decrease in the Price

question 214

Multiple Choice

Along a short-run aggregate supply curve, a decrease in the price level means that

• A) more output is produced as consumer demand increases.
• B) less output is produced as firms decrease production.
• C) more output is produced as firms increase production because wages fall more than the price level falls, making it profitable to hire more workers.
• D) output does not change because firms do not change the quantity they produce.

---

Definitions:

Direct Labour Cost

The wages and benefits paid to employees who are directly involved in the production of goods or services.

Manufacturing Overhead Applied

The portion of estimated manufacturing overhead costs that is assigned to each unit of production, based on a predetermined rate.

Job-order Costing

An accounting method that tracks costs individually for each job, rather than within set periods.

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to allocate manufacturing overhead to individual units of production based on estimated costs.