Figure 14-5 Suppose a Firm Operating in a Competitive Market Has the Has

question 328

Multiple Choice

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:
-Refer to Figure 14-5. In the short run,if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn

• A)positive profits.
• B)zero profits.
• C)losses but will remain in business.
• D)losses and will shut down.

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Definitions:

Facility-level Activity

Activities that benefit the entire operation and cannot be directly traced to a specific product or service.

Unit-level Activity

Activities and costs that vary with the number of units produced, directly tied to the production volume.

Product-level Activity

Activities and costs associated with a specific product, rather than with the entire business operation.

Activity-based Costing

A method of allocating indirect costs to products or services based on the activities that generate those costs.