What Is One Reason Perfectly Competitive Firms Wish to Be

question 38

Multiple Choice

What is one reason perfectly competitive firms wish to be ever more efficient?

• A) Individual firms are awarded by the tax code to be more efficient.
• B) Individual firms can better control their costs than the price they can charge.
• C) Individual firms can better control their costs than their output levels.
• D) Individual firms don't need to be efficient; government policies do not reward efficiency.

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Definitions:

Fixed Expenses

Costs that do not fluctuate with the level of production or sales, such as lease payments and salaries of permanent staff.

Net Income

The profit remaining after all expenses, taxes, and costs have been subtracted from total revenue.

Variable Expenses

Costs that vary in direct proportion to changes in an organization's activity level or volume of output.

Operating Leverage

A measure of how sensitive net operating income is to a given percentage change in dollar sales.