If the Market for Used Computers Has Only Lemons (Low-Quality

question 58

Multiple Choice

If the market for used computers has only lemons (low-quality computers) then the market

• A) is an example of a thick market.
• B) suffers from an adverse selection problem.
• C) is a type of monopoly.
• D) must be monopolistically competitive.

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Definitions:

Break-even Sales

refers to the amount of revenue needed to cover all fixed and variable costs, at which point a business neither makes a profit nor incurs a loss.

Absorption Costing

A technique in accounting that rolls all manufacturing expenses including direct material costs, direct labor, and every overhead, regardless if fixed or variable, into the overall cost of a product.

Unit Product Cost

The overall expense involved in creating one unit of a product, encompassing direct materials, direct labor, and distributed overhead costs.

Absorption Costing

An accounting method that includes all manufacturing costs (both variable and fixed) in the cost of a product.