One Reads the Following in a Newspaper: "Today the President

question 223

Multiple Choice

One reads the following in a newspaper: "Today the president and Congress agreed to impose new restrictive quotas on Japanese cars coming into the country." As a result,an economist would predict that the

• A) supply of cars in the country will remain the same and the (average)price of cars will fall.
• B) supply of cars in the country will fall and the (average)price of cars will rise.
• C) supply of cars in the country will rise and the (average)price of cars will fall.
• D) demand for cars in the country will fall and the (average)price of cars will rise.
• E) demand for cars in the country will rise and the (average)price of cars will rise.

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Definitions:

Manufacturing Margin

The difference between the sales income generated by manufactured goods and the cost of goods sold.

Absorption Costing

An accounting method that includes all manufacturing costs – direct materials, direct labor, and both variable and fixed overhead – in the cost of a product.

Contribution Margin

A financial metric that represents the difference between a product's sales revenue and its variable costs.

Variable Costing

A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of a unit of product.