If Price Is Above Average Total Costs, the Firm

question 60

Multiple Choice

If price is above average total costs, the firm

• A) is earning positive profits.
• B) is earning negative profits.
• C) is making a normal rate of return on its capital investment.
• D) may be earning a positive or negative profit depending upon costs.

---

Definitions:

Power Generation

The process of producing electrical energy from other forms of energy, such as coal, natural gas, wind, or solar power.

Insulating Cost Allocation

The approach in assigning overhead and indirect costs to goods or services to avoid fluctuations in cost assignments.

Cost Allocation Method

A technique used to assign indirect costs to products, services, or departments based on relevant cost drivers.