Long-Run Equilibrium Occurs in a Competitive Market When

question 64

Multiple Choice

Long-run equilibrium occurs in a competitive market when

• A)economic profit and economic loss have been eliminated.
• B)no barriers to entry exist.
• C)all firms are operating at their shutdown points.
• D)price equals marginal cost.
• E)total revenue is maximized.

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Definitions:

Contribution Margin

The difference between the sales revenue of a product and its variable costs, used to cover fixed costs and contribute to profit.

Variable Costing

An accounting method that only assigns variable costs to inventory, treating fixed costs as expenses in the period they are incurred.

Variable Costing

An accounting practice that only factors in variable production expenses (like direct materials, direct labor, and variable manufacturing overhead) into the cost of goods.

Unit Product Cost

The total cost (including materials, labor, and overhead) divided by the number of units produced, representing the cost to produce a single unit of product.