Refer to the Graph Shown

question 39

Multiple Choice

Refer to the graph shown. If the market price is $4, a perfectly competitive firm:

• A) breaks even.
• B) earns a profit.
• C) incurs a loss but can still cover its variable costs and some of its fixed costs.
• D) incurs a loss and cannot cover its variable costs.

---

Definitions:

Product Costs

Costs that are directly associated with the production of goods or services, including direct materials, direct labor, and manufacturing overhead.

Period Costs

Expenses that are not directly tied to the production of goods and are therefore expensed in the period they occur, such as selling and administrative expenses.

Variable Cost

Costs that vary directly with the level of production or service delivery.

Fixed Manufacturing Cost

A rephrased definition for Fixed Manufacturing Overhead; these are costs that do not change with the level of manufacturing activity, such as property taxes on a factory.