In a Perfectly Competitive Constant-Cost Industry

question 95

Multiple Choice

In a perfectly competitive constant-cost industry:

• A) factor prices do not change as industry output increases.
• B) factor prices rise as industry output increases.
• C) factor prices fall as industry output increases.
• D) there is no way to predict what will happen to factor prices as industry output increases.

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Definitions:

Unit

A single item, person, or measurement regarded as an indivisible part of a larger quantity or whole.

Operating Leverage (DOL)

A measure of how revenue growth translates into growth in operating income, emphasizing the impact of fixed costs.

Operating Income (EBIT)

Earnings Before Interest and Taxes, a measure of a company's profitability from its operations.

Dollar Sales

The total revenue generated from the sale of goods or services, measured in dollars.