If the Demand for a Product Increases in an Increasing-Cost

question 57

Multiple Choice

If the demand for a product increases in an increasing-cost industry, as the market adjusts in the long run, production costs for all firms will

• A) rise as new firms enter the industry.
• B) fall as new firms enter the industry.
• C) remain unchanged.
• D) fall as firms exit the industry.

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Definitions:

Straight-Line Method

A depreciation technique that allocates an equal amount of depreciation expense for an asset over its useful life.

General Journal Entry

A record in the general journal that includes all the financial transactions of a company, showing accounts affected, amounts, and whether those amounts are debits or credits.

Amortizing

The process of gradually paying off a debt over time through regular payments.

Straight-Line Method

A method of calculating depreciation by evenly distributing the cost of an asset over its useful life.