If a Price Is Above Equilibrium

question 127

Multiple Choice

If a price is above equilibrium,

• A)A shortage will cause the price to fall and the quantity supplied to decrease.
• B)A shortage will cause the price to rise and the quantity supplied to increase.
• C)A surplus will cause the price to fall and the quantity supplied to decrease.
• D)A surplus will cause the price to fall and the quantity supplied to increase.

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Definitions:

Direct Labor

The wages and other compensation for employees who are directly involved in the production of goods or services.

Manufacturing Overhead

All manufacturing costs that are not directly attributable to a product’s production, such as indirect materials and labor.

Raw Materials

Fundamental materials in their raw, altered, or partially processed forms utilized as input for manufacturing.

Overhead Rate

A ratio used to allocate indirect costs to products or services, calculated by dividing total overhead costs by an allocation base, such as direct labor hours.