What Will Happen to the Equilibrium Price and Quantity of New

question 249

Multiple Choice

What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages?

• A)Price will fall, and the effect on quantity is ambiguous.
• B)Price will rise, and the effect on quantity is ambiguous.
• C)Quantity will fall, and the effect on price is ambiguous.
• D)Quantity will rise, and the effect on price is ambiguous.

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Definitions:

Mixing Department

A specific sector within a manufacturing facility where raw materials are combined or processed before further manufacturing.

Equivalent Unit

A measurement used in cost accounting to express the amount of work done on incomplete units in terms of fully completed units, facilitating cost analysis.

Direct Method

A cost allocation method that assigns service department costs directly to production departments without any intermediary allocations.

Service Department Costs

Expenses associated with departments that do not directly produce goods but provide essential services to those that do, like maintenance and security.