If a Perfectly Competitive Firm Is Producing at the Output

question 102

Multiple Choice

If a perfectly competitive firm is producing at the output level where marginal revenue is equal to marginal cost and at this output level, the market price exceeds the firm's average total cost, the firm is _______.

• A)incurring an economic loss
• B)not producing at the profit-maximizing output level
• C)earning economic profits
• D)earning a competitive return

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Definitions:

Actual Operations

The real, observed activities and results of a business's operations, as opposed to projections or estimates.

Materials Quantity Variance

The variance between the real amount of materials consumed in the production process and the anticipated standard amount, times the standard unit cost.

Direct Materials Purchases Variance

A measure used in accounting to analyze the difference between the budgeted cost of materials needed for production and the actual cost incurred.

Actual Production

The real quantity of goods or services produced in a specified period, as opposed to planned or expected production levels.