A Government Currently Uses Price Controls to Hold Down the Price

question 84

Multiple Choice

A government currently uses price controls to hold down the price of zinc, an exhaustible resource.If price controls are removed,

• A)production of zinc will probably fall.
• B)zinc mines with high marginal cost of production will probably stop producing.
• C)consumers of zinc will probably want substitutes for zinc.
• D)income will probably be redistributed from zinc producers to zinc consumers.

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Definitions:

Weight Allocation

Weight allocation refers to the method of assigning proportions of a total, such as costs or resources, based on the relative weight or importance of various components or activities.

Physical Units Method

An inventory costing method that allocates costs based on the actual physical units of goods available for sale or use.

By-Product

A secondary product derived from the manufacturing process or chemical reaction that is incidental to the main product.

Joint Products

Products that are produced together from the same process or raw materials but are sold as separate items.