The Use of the FIFO Method Generally Increases Taxable Income

question 16

Multiple Choice

The use of the FIFO method generally increases taxable income:

• A)when inventory costs are constant.
• B)when inventory costs are declining.
• C)when inventory costs are increasing.
• D)under all circumstances.

---

Definitions:

Subsidy

A financial contribution granted by a government or organization to support a business, industry, or activity, making it more affordable or viable.

Market Equilibrium

A state in the market where the quantity demanded by consumers equals the quantity supplied by producers, leading to a stable price for a good or service.

Socially Optimal Level

A state in which resources are allocated in the most efficient way possible, maximizing societal welfare or benefit.

Positive Externalities

Benefits experienced by third-parties or the society at large due to an economic activity, not directly involved in the transaction, such as education or vaccination.