Suppose That a Profit-Maximizing Monopoly Firm Experiences a Substantial Technological

question 198

Multiple Choice

Suppose that a profit-maximizing monopoly firm experiences a substantial technological change that reduces its marginal and average total costs by $40.With the reduction in its costs, the firm will probably:

• A) lower its price by $40.
• B) lower its price, but by less than $40.
• C) lower its price, but by more than $40.
• D) It is not possible to make a determination from the information given.

Grasp the concepts of relevance and faithful representation in financial reporting.

Understand the characteristics of accounting information and the importance of consistency in application.

Describe the assumptions underlying financial accounting, including the economic entity, going concern, and the time period assumption.

Understand the principles of revenue recognition and expense recognition.

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Definitions:

Financial Forecasting

The process of estimating or predicting how a business will perform in the future through its financial statements.

FA/Sales Ratio

The Fixed Asset to Sales Ratio compares a company's total amount of fixed assets to its sales revenue, indicating how efficiently the company uses its fixed assets to generate sales.

Financial Forecast

A prediction of future revenues, expenses, and profits for a specific period.

Fixed Assets

Long-term tangible assets that are used in the operations of a business and are not expected to be consumed or converted into cash within a year.