A Price Ceiling Does All of the Following Except

question 139

Multiple Choice

A price ceiling does all of the following except:

• A) Increases the quantity demanded relative to the equilibrium level.
• B) Creates excess supply.
• C) Creates a market shortage.
• D) Decreases the quantity supplied relative to the equilibrium level.

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Definitions:

Manufacturing Overhead

Expenses related to the manufacturing process that are not directly tied to specific products, such as salaries of supervisory staff and factory maintenance.

Direct Materials

Materials that are traceable to the production of specific goods or services and included in the cost of those goods or services.

Direct Labour

is the cost associated with workers who are directly involved in the production of goods or services, such as wages for assembly line workers.

Prime Cost

The sum of direct materials and direct labor costs that are directly attributable to the production of a product.