If a Large Decrease in Rent Leads to a Firm

question 111

Multiple Choice

If a large decrease in rent leads to a firm cutting back on the labor it uses,

• A)the output effect outweighs the substitution effect.
• B)the substitution effect outweighs the output effect.
• C)the substitution and output effects are equal.
• D)there is no way of determining the relative strengths of the output and substitution effects.

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Definitions:

Standard Costing Systems

A cost accounting method that compares actual costs to standard costs to help managers control business costs.

Variances

Differences between planned or expected financial outcomes and the actual results observed.

Performance Reports

Documented assessments that provide information on the performance of activities, processes, or strategies against planned objectives.

Sales Price Variance

The difference between the actual sales revenue received from a product and the expected revenue, based on the planned selling price and actual quantity sold.