Suppose a Firm in a Competitive Market Notices That Its

question 124

Multiple Choice

Suppose a firm in a competitive market notices that its marginal cost is greater than its price.This means that:

• A)there are opportunities to increase profit or reduce losses by increasing production
• B)there are opportunities to increase profit or reduce losses by decreasing production
• C)marginal cost must be falling
• D)the firm should increase its marketing budget

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Definitions:

Inventory Purchase

The acquisition of goods and materials that a company intends to sell, considered as a current asset on the balance sheet.

Perpetual Inventory Method

A method of accounting that instantly documents the sale or acquisition of inventory utilizing computerized point-of-sale systems and software for managing enterprise assets.

Gross Profit Rate

The ratio of gross profit (sales minus cost of goods sold) to net sales, showing the efficiency at which a company produces its goods.

Partial Equity Method

A variation of the equity method, where initial recognition is at cost and subsequent recognition involves recording dividends as income and not adjusting for the investee's retained earnings.