A Newspaper Story Recently Reported That the Price of New

question 153

Multiple Choice

A newspaper story recently reported that the price of new cars, a normal good, has decreased and the quantity of new cars sold has dropped. The new price and quantity could have been caused by:

• A)a decrease in buyers' incomes.
• B)an increase in buyers' incomes.
• C)an increase in production costs.
• D)a decrease in production costs.

---

Definitions:

Indirect Costs

Costs that are not directly assignable to a specific product or project, such as rent, utilities, and managerial salaries.

Account Analysis

A detailed examination of the components of an account, usually to identify specific trends, costs, or areas of improvement within a business.

Variable Cost

Costs that vary directly with the level of production or output, such as raw materials and direct labor.

Fixed Cost

Costs that remain constant in total regardless of changes in the level of activity within a relevant range, such as rent, salaries, and insurance premiums.