When Existing Firms Lose Customers and Profits Due to Entry

question 81

Multiple Choice

When existing firms lose customers and profits due to entry of a new competitor, a

• A)predatory-pricing externality occurs.
• B)consumption externality occurs.
• C)business-stealing externality occurs.
• D)product-variety externality occurs.

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Definitions:

Direct Labor

The wages or costs associated with workers who are directly involved in the production of goods or services.

Indirect Labor Costs

Expenses for labor that supports the production process but is not directly involved in the creation of the product or service.

Overhead Applied

The portion of overhead costs allocated to the production of goods based on a predetermined rate.

Manufacturing Overhead

All the indirect costs associated with the production process, including utilities, maintenance, and salaries of non-direct labor.