What Would Be the Effect on December's Statement of Earnings

question 12

Multiple Choice

What would be the effect on December's statement of earnings of a utility bill received on December 27, 2013 but which will not be paid until January 10, 2014?

• A) No expense will be recognized until the bill is paid in January
• B) We would cause an increase in profit by recording the expense in December
• C) Recording the expense in December when it is incurred will increase expenses
• D) Profit will be decreased when we pay the bill in January

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Definitions:

Monopolistic Competition

describes a market structure where many firms sell products that are similar but not identical, leading to competition.

Allocative Efficiency

A state of the economy where resources are allocated in a way that maximizes the overall welfare or utility of consumers.

Average Cost

The total cost divided by the number of goods produced, representing the cost per unit of output.

Long Run

A period of time in economics during which all factors of production and costs are variable, allowing for full adjustment to changes.