Assume That There Is an Outward Shift in the Demand

question 67

Multiple Choice

Assume that there is an outward shift in the demand for chairs.Which of the following best describes the short-run response within the competitive market for chairs?

• A)Existing firms and new firms will expand output by using more of all inputs.
• B)Existing firms will keep fixed inputs unchanged and expand output using the variable inputs.
• C)Existing firms will increase their profits by producing the same output at a higher price.
• D)Existing firms cannot increase production in the short-run so the price of chairs will increase.

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Definitions:

Direct Labor-Hours

The total hours worked by employees that are directly involved in the production process, serving as a measure for allocating labor costs to products or services.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products based on a certain activity base.

Plantwide Predetermined

A rate calculated by dividing the estimated manufacturing overhead cost by the estimated amount of a cost driver, applied uniformly across a manufacturing plant.

Manufacturing Overhead Rate

A calculation used in costing that allocates indirect manufacturing costs to products based on a predetermined factor, such as machine hours or labor costs.