A Perfectly Competitive Firm Is Breaking Even

question 224

Multiple Choice

A perfectly competitive firm is breaking even. In the short run it should ________. In the long run it should ________.

• A) shut down; expand
• B) produce where MC = MR; leave the industry
• C) produce where MC = MR; keep the same production level
• D) shut down; exit the industry

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Definitions:

Fixed Overhead Volume Variance

The difference between the budgeted and actual overhead costs due to variations in production volume.

Machine Breakdowns

Unplanned events where machinery or equipment fails to function correctly, leading to production delays, increased maintenance costs, and potential operational losses.

Increase In Utility Costs

A rise in the expenses associated with utilities such as electricity, water, and gas consumed by a business or individual.

Purchase Price Variances

Differences between the actual cost of materials purchased and the expected (budgeted) cost, often analyzed in cost accounting.