According to the Keynesian Theory, the Typical Firm

question 359

Multiple Choice

According to the Keynesian theory, the typical firm

• A) changes its prices frequently in response to fluctuations in aggregate demand.
• B) lowers its prices when inventories are decreasing.
• C) does not change its prices immediately when aggregate demand fluctuates.
• D) lowers its prices if sales exceed production.

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Definitions:

Gross Profit

The financial difference between revenue and the cost of goods sold before other expenses are deducted.

Fixed Factory Overhead Rate

A predetermined rate used to allocate fixed overhead costs to produced goods based on a consistent basis, such as labor hours or machine hours.

Fixed Factory Overhead Volume Variance

A measure used in cost accounting to determine the difference between the budgeted and actual volume of production, affecting the allocation of fixed overhead costs.

Standard Direct Materials

The predetermined cost and quantity of raw materials expected to be used in the production process, used for budgeting and performance evaluation.