The Elimination Principle, a General Feature of Competitive Markets, Tells

question 23

Multiple Choice

The elimination principle, a general feature of competitive markets, tells us that:

• A) below-normal profits may be permanent.
• B) above-normal profits may be permanent.
• C) above-normal profits are temporary.
• D) above-normal profits result in firms exiting the industry.

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Definitions:

Predetermined Overhead Rate

A rate calculated before the period begins by dividing the estimated total overhead costs by an estimated allocation base, used to assign overhead costs to products or job orders.

Manufacturing Cost

The total expense incurred in the process of producing goods, including raw materials, labor, and overhead.

Predetermined Overhead Rate

A rate used to allocate estimated overhead costs to specific products or job orders based on a preselected activity base.

Labor-Hours

The total hours worked by employees, usually in the context of manufacturing or production, that can be used to allocate costs or measure productivity.