The Behavior of the Perfectly Competitive Firm

question 44

Multiple Choice

The behavior of the perfectly competitive firm

• A)theoretically leads to an inefficient allocation of resources.
• B)maximizes the benefits to consumers, given the resources available to the economy.
• C)reduces output in order to raise prices in the short term.
• D)results in excess capacity and inefficiency.

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - as part of the cost of a product.

Carrying Value

The net amount at which an asset is valued on a company's balance sheet, considering its original cost minus any depreciation, amortization, or impairment costs.

Unit Product Cost

The cost associated with producing a single unit of product, including direct materials, direct labor, and allocated overhead expenses.

Net Operating Income

A company's operating profit after subtracting all operating expenses but before interest and taxes, reflecting the profitability of the core business activities.