If the Price Elasticity of Supply Is 4, an Increase

question 205

Multiple Choice

If the price elasticity of supply is 4, an increase in the price of Good X by 5 percent causes the quantity supplied of it to:

• A) rise 20 percent.
• B) fall 20 percent.
• C) rise 1.25 percent.
• D) fall 1.25 percent.

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Definitions:

Variable Factory Overhead

Costs in manufacturing that fluctuate with the level of production, such as utilities or materials.

Direct Materials

Raw materials that are directly incorporated into a finished product and can easily be traced to the product.

Quantity Variance

The difference between the expected and actual quantities of inputs used in the production process, affecting the cost of goods sold.

Price Variance

The difference between the actual cost of a good or service and its expected or budgeted cost.