An Individual Wheat Farmer Produces Wheat in a Perfectly Competitive

question 269

Multiple Choice

An individual wheat farmer produces wheat in a perfectly competitive market. A decrease in the market demand for wheat will cause the farmer's marginal revenue to ________ and his profit-maximizing level of output to ________.

• A) increase; increase
• B) increase; decrease
• C) decrease; increase
• D) decrease; decrease

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Definitions:

Standard Costing

An accounting method that assigns predetermined costs to cost units, used to control costs and measure performance.

Labour Efficiency Variance

The difference between the actual labor hours used and the standard labor hours expected for the level of production achieved.

Variable Overhead

Indirect manufacturing costs that vary with the level of production output, such as utilities and maintenance expenses.

Labour Rate Variance

The difference between the actual cost of labor and its budgeted (or standard) cost, often arising from paying different wages than anticipated.