The Elimination Principle, a General Feature of Competitivemarkets, Tells Us

question 1

Multiple Choice

The elimination principle, a general feature of competitivemarkets, tells us that:

• A)below-normal profits may be permanent.
• B)above-normal profits may be permanent.
• C)above-normal profits are temporary.(True Answer )Correct
• D)above-normal profits result in firms exiting the industry.

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Definitions:

Machine-Hours

A measure of production output or capacity, indicating the total hours that machinery is operated over a specific period.

Fixed Overhead

Regular, unchanged costs incurred by a business for its operations regardless of varying levels of production, such as rent, salaries, and insurance.

Unused Capacity

The available resources or production capabilities that are not currently being utilized.

Activity-Based Costing

A method of costing that apportions indirect expenses and overhead to specific operations, enhancing the accuracy of product cost calculations.