The First Table Shows Cost Data for a Single Firm

question 134

Multiple Choice

The first table shows cost data for a single firm. Now suppose that there are 600 identical firms in this industry, each with the same cost data. Suppose, too, that the demand curve for this industry is as shown in the second table. At equilibrium, each firm will realize

• A)an economic profit of $155.
• B)an economic profit of $35.
• C)a loss of $45.
• D)a loss of $135.

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Definitions:

Standard Costs

Predetermined costs for materials, labor, and overhead that are used for budgeting and cost control purposes.

Raw Materials

The unprocessed natural materials or substances used in the initial stages of production or manufacturing.

Cost System

A method used to allocate costs to products, services, projects, or departments to facilitate financial analysis, budgeting, and managerial decision-making.

Gallons

A unit of volume measurement used primarily for liquids, commonly used in the United States.