Related to the Economics in Practice on Page 198: If

question 67

Multiple Choice

Related to the Economics in Practice on page 198: If the long-run average cost curve in an industry has a long, flat section, which of the following must be true?

• A) There is no single point on the curve that is the best.
• B) Small firms have higher average costs than large firms.
• C) Existing firms have no incentive to expand.
• D) There would be no difference between the industry's short-run average cost curve and its long-run average cost curve.

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Definitions:

Cost of Tracie's Direct Labor

The total expense associated with the work performed by Tracie directly involved in producing goods or services.

Variable Overhead Rate

This rate reflects the cost of variable overhead allocated to each unit of production, based on an activity such as direct labor hours.

Direct Labor-Hours

The total hours worked by employees directly involved in the manufacturing process or providing a service.

Fixed Manufacturing Overhead

Costs that do not change with the level of manufacturing output, including salaries of managers and depreciation of factory equipment.