Which of the Following Statements Best Reflects a Price-Taking Firm

question 520

Multiple Choice

Which of the following statements best reflects a price-taking firm?

• A)The firm can sell only a limited amount of output at the market price before the market price will fall.
• B)If the firm were to charge less than the going price, it would maximize its profits and revenues.
• C)If the firm were to charge more than the going price, it would sell none of its goods.
• D)Both b and c are correct.

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Definitions:

Net Operating Income

The profit a company generates from its regular, core business operations, excluding income from investments and after subtracting operating expenses.

Fixed Manufacturing Overhead

The sum of all the production costs that are not directly linked to the volume of production, such as salaries of managers and depreciation of equipment.

Absorption Costing

A method of costing that includes all manufacturing costs—both fixed and variable—in the cost of a product.

Break-Even

The financial point at which revenues exactly cover all costs, both fixed and variable, representing no profit or loss situation with different wording.