A Business-Stealing Externality

question 175

Multiple Choice

A business-stealing externality

• A)is an externality that is likely to be punished under antitrust laws.
• B)is the negative externality that occurs when one firm attempts to duplicate exactly the product of a different firm.
• C)is an externality that is considered to be an explicit cost of business in monopolistically competitive markets.
• D)is the negative externality associated with entry of new firms in a monopolistically competitive market.

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Definitions:

Direct Materials

The raw materials that are directly traced and integrated into the final product and are a significant part of the manufacturing cost.

Weighted-Average Method

is an inventory costing method that assigns the average cost of goods available for sale to both ending inventory and cost of goods sold.

Conversion Costs

The sum of direct labor and manufacturing overhead costs, representing the costs incurred to convert raw materials into finished products.

Direct Materials

Raw materials that are directly traceable to the production of a specific product and included in the cost of that product.