In the Short Run, for a Firm in Monopolistic Competition

question 61

Multiple Choice

In the short run, for a firm in monopolistic competition

• A) the firm's economic profit must equal zero.
• B) marginal revenue exceeds marginal cost.
• C) price exceeds marginal cost.
• D) the firm is a price taker.

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Definitions:

Variable Overhead Rate Variance

The difference between the actual variable overhead rate incurred and the standard rate, multiplied by the actual activity level.

Standard Cost

The predetermined cost of manufacturing a single unit or a number of units during a specific period under normal conditions.

Raw Materials Quantity Variance

The difference between the actual quantity of raw materials used and the expected quantity of raw materials based on the standard cost, which indicates efficiency in using materials.

Standard Cost System

An accounting system that uses standard costs for product costs, serving as a tool for planning, controlling, and decision making.