When State Regulators Require Consumers to Purchase and Use a Safety

question 83

Multiple Choice

When state regulators require consumers to purchase and use a safety device,the regulation

• A)always reduces total economic surplus.
• B)has an ambiguous effect on total economic surplus,depending on whether the regulation infringes on personal liberty.
• C)does not reduce total economic surplus if the marginal cost of providing the last device purchased is equal to the marginal social benefit of that device.
• D)increases total economic surplus if the government subsidizes the purchase.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate estimated manufacturing overhead costs to individual units of production, based on a particular activity base.

Direct Labor-Hours

The totality of hours devoted by workers directly engaged in the fabrication of products.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including utilities, rent, and salaries for non-direct labor, that are not directly traceable to specific units produced.

Overapplied Manufacturing Overhead

A scenario in which the allocated manufacturing overhead costs exceed the actual overhead costs incurred.