Figure 6.5 -Figure 6.5 Shows the Short-Run and Long-Run Effects of an of an Increase

question 86

Multiple Choice

Figure 6.5
-Figure 6.5 shows the short-run and long-run effects of an increase in demand of an industry with increasing cost. The market is in equilibrium at point A, where 100 identical firms produce 6 units of a product per hour. If the market demand curve shifts to the right, what will happen to an individual firm's profit?

• A) Each firm earns a positive profit at point B.
• B) Each firm earns a zero profit at point B because the market is perfectly competitive.
• C) The profit of each firm decreases as more firms enter the market and share the benefits of an increase in demand pushing the market from point A to point B.
• D) none of the above

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Definitions:

Material Price Variance

The difference between the actual cost of materials purchased and the expected (or standard) cost, reflecting how effectively a company controls its material costs.

Executive Managers

Senior-level employees responsible for the strategic planning and direction of a company's operations.

Operating Income

A measure of a company's profit that excludes non-operating expenses such as interest and taxes, focusing on the profit generated from core business operations.

Strategic Performance Measurement System

A framework that integrates financial and non-financial performance indicators to assess an organization's effectiveness in achieving its strategic objectives.