The Practical Capacity of a Cost Driver Is the Short-Term

question 32

True/False

The practical capacity of a cost driver is the short-term capacity made available by the amount of resources committed to an overhead activity.

---

Definitions:

Long Run

In economics, the time period in which all factors of production and costs can be fully adjusted, contrasting with the short run where some costs are fixed.

Marginal Revenue

The additional income received from selling one more unit of a good or service.

Marginal Cost

The elevation in aggregate cost associated with creating an extra unit of a good or service.

Monopolistically Competitive Market

A market structure in which many companies sell products that are similar but not identical, allowing for slight product differentiation and some price control.