In Principle,a Comparison of the Long-Run Equilibrium of Competitive and (Single-Price)monopoly

question 36

Multiple Choice

In principle,a comparison of the long-run equilibrium of competitive and (single-price) monopoly industries leads to the following conclusion:

• A)both the competitive industry and the monopoly will allocate resources efficiently.
• B)the competitive industry is consistent with allocative efficiency whereas the monopoly is not.
• C)neither industry is capable of allocative efficiency.
• D)the competitive industry will achieve productive efficiency but the monopoly will not.
• E)both the competitive industry and the monopoly will allocate resources inefficiently.

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Definitions:

Standard Cost System

An accounting method that uses predetermined costs for product costing, budgeting, and inventory valuation purposes.

Work in Process

Items that are in the process of being produced but are not yet completed in a manufacturing setting.

Standard Costs

Estimated costs of production, labor, and materials that are set in order to budget and control expenses.

Fixed Manufacturing Overhead

Expenses associated with manufacturing that do not vary with the level of production, including salaries of managers and depreciation of equipment.