When Firms in Monopolistic Competition Incur an Economic Loss

question 93

Multiple Choice

When firms in monopolistic competition incur an economic loss,

• A)firms enter the industry and produce better products.
• B)firms exit the industry,and demand increases for the products of the firms that remain.
• C)firms exit the industry,and demand decreases for the firms that remain in the industry.
• D)firms enter the industry,and demand increases for the firms that were originally in the industry.
• E)the industry will eventually disappear.

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Definitions:

Labour Efficiency Variance

The difference between the actual labor hours used and the standard labor hours expected for the level of production achieved, often indicating productivity levels.

Variable Overhead

Costs that vary with the level of production output, such as utilities for a manufacturing plant, which increase with more production.

Labour Rate Variance

The difference between the actual cost of labor and its expected cost based on standards set for production.

Labour Efficiency Variance

The difference between the actual labor hours used in production and the standard hours expected, multiplied by the standard labor rate.