Which of the Following Is TRUE

question 231

Multiple Choice

Which of the following is TRUE?

• A) For choosing the profit-maximizing quantity, the short-run decision-making process of a firm in perfect competition is the same as that of a firm in monopolistic competition, since they produce so that P > MC.
• B) In the long run in perfect competition, economic profits equal zero, and in monopolistic competition in the long run, economic profits are very large.
• C) In perfect competition, P = MC, and in monopolistic competition, MR = MC, but P > MC and there is excess capacity.
• D) In both perfect competition and monopolistic competition, P equals minimum average total cost in the long run.

Understand the role and development of normative theories in accounting.

Comprehend the components and consequences of agency costs, including monitoring and bonding costs, and residual losses.

Understand the economic assumptions underlying positive accounting theory, including the rational economic person assumption.

Recognize the importance of accounting policy decisions in financial reporting.

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Definitions:

Adjusting Entry

An accounting journal entry made at the end of an accounting period to update the accounts for accruals and deferrals that have not been recorded during the period.

Accounts Payable

This term signifies the amount of money a company owes to its suppliers or vendors for goods or services received but not yet paid for.

Accrue Expense

An accounting method where expenses are recognized when incurred but not yet paid, reflecting the economic reality of the expense.

Prepaid Utilities

Expenses paid in advance for utilities services, recognized as assets on the balance sheet until they are consumed.