In the Specific Factors Model,a 5% Increase in the Price

question 12

Multiple Choice

In the specific factors model,a 5% increase in the price of food accompanied by a 5% increase in the price of cloth will cause ________ in the welfare of labor,________ in the welfare of the fixed factor in the production of food,and ________ in the welfare of the fixed factor in the production of cloth.

• A) no change; no change; no change
• B) an increase; an increase; an increase
• C) a decrease; an increase; an increase
• D) an increase; a decrease; a decrease
• E) a decrease; a decrease; a decrease

---

Definitions:

Total Price Variance

The difference between the actual cost of a good or service and its expected cost based on standard pricing.

Quantity Variances

Differences between actual and expected (or standard) quantities of inputs or outputs in the production process, affecting costs.

Standard Cost Sheet

A document that outlines the expected costs associated with the production of a product, including materials, labor, and overhead.

Labor Price Variance

The difference between the actual cost of direct labor and the standard cost of labor that was expected during a period.