A Monopolistically Competitive Firm Is Producing an Output Level at Which

question 147

Multiple Choice

A monopolistically competitive firm is producing an output level at which marginal revenue is less than marginal cost.This firm should __________ quantity and __________ price to increase profit or reduce losses.

• A)increase, increase
• B)increase; decrease
• C)decrease; increase
• D)decrease; decrease
• E)increase; not change

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Definitions:

Overhead Cost Driver

A factor that causes the cost of overheads to change, such as machine hours or labor hours.

Predetermined Overhead Rate

A rate estimated before a period begins, used to allocate overhead costs to products or job orders based on a chosen activity base.

Allocation Base

A measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects.

Manufacturing Overhead Cost

All manufacturing costs that are not directly associated with the production of a product, including indirect materials, indirect labor, and other expenses.