Which Statement About Market Power Is Incorrect

question 101

Multiple Choice

Which statement about market power is incorrect?

• A)It can lead to price increases that exploit consumers.
• B)It can lead to resource misallocation.
• C)It can lead to inefficient production and the lack of innovation.
• D)Monopoly power can lead to decreases in producer surplus.

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Definitions:

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to assign overhead costs to products or job orders based on a relevant activity base such as machine hours or labor hours.

Direct Labor-Hours

The sum of all hours spent by workers who are directly engaged in manufacturing, used as a foundation for distributing labor expenses to products or services.

Traditional Costing

An accounting method that allocates manufacturing overhead costs to products based on volume-related measures, such as labor hours or machine hours.

Unit Product Cost

The total cost (both direct and indirect) associated with producing a single unit of a product.