If a Price Is Above Equilibrium

question 127

Multiple Choice

If a price is above equilibrium,

• A)A shortage will cause the price to fall and the quantity supplied to decrease.
• B)A shortage will cause the price to rise and the quantity supplied to increase.
• C)A surplus will cause the price to fall and the quantity supplied to decrease.
• D)A surplus will cause the price to fall and the quantity supplied to increase.

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Definitions:

First-In, First-Out

An inventory valuation method where the oldest stock is sold first.

Grinding Department

A specific section in a manufacturing process where grinding operations (material removal process) are performed.

Conversion Costs

Conversion costs are the costs required to convert raw materials into finished products. They include direct labor and manufacturing overhead, excluding the cost of raw materials.

Equivalent Units

Equivalent units are used in cost accounting to represent a portion of unfinished goods in a way that can be compared to complete units, facilitating the process of costing inventory.