Refer to the Above Figure

question 355

Multiple Choice

Refer to the above figure. Assume that B is the current long-run aggregate supply (LRAS) curve and E is the current short-run aggregate supply (SRAS) curve. If a 90-day embargo of oil from the Middle East to the United States were announced, and if after that 90-day period oil prices were expected to return to normal pre-embargo prices, then you would expect

• A) the LRAS and the SRAS to remain at B and E, respectively.
• B) the LRAS to remain at B, but the SRAS to shift to D.
• C) the LRAS to remain at B, but the SRAS to shift to F.
• D) the LRAS to shift to C, and the SRAS to shift to F.

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Definitions:

Overhead Controllable Variance

The difference between actual overhead expenses incurred and the budgeted or expected overhead costs that can be managed or controlled.

Standard Hours Allowed

The predetermined amount of time expected to be taken to complete a specific task or job under normal conditions.

Overhead Volume Variance

The difference between the budgeted overhead cost and the applied overhead cost based on actual activity levels.

Labor Price Variance

The difference between the actual cost of labor and the budgeted or standard cost of labor, used in budgeting and cost management.