Cartels Made Up of a Large Number of Firms Are

question 141

Multiple Choice

Cartels made up of a large number of firms are unstable because each firm in the cartel:

• A)has an incentive to cheat.
• B)is producing a relatively homogeneous product in which entry barriers are also low.
• C)does not have to worry about losses.
• D)recognizes that the market is relatively stable in size.

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Definitions:

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders based on a specific activity base, such as labor hours or machine hours.

Machine-Hours

A measure of the amount of time a machine is operated within a given period.

Direct Labor-Hours

The total hours worked by employees who are directly involved in the production process.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate estimated overhead costs to products based on a predetermined activity base.