If Duopoly Firms That Are Not Colluding Were Able to Successfully

question 181

Multiple Choice

If duopoly firms that are not colluding were able to successfully collude, then

• A)price and quantity would rise.
• B)price and quantity would fall.
• C)price would rise and quantity would fall.
• D)price would fall and quantity would rise.

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Definitions:

Absorption Costing

Absorption costing is an accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - in the cost of a product.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, excluding fixed manufacturing overhead.

Fixed Manufacturing Overhead

Costs that do not change with the level of production activity, such as salaries of managers, depreciation of factory equipment, and utility costs of the factory.

Absorption Costing

A product costing technique that assigns all costs of production (both variable and fixed) to the product, including overheads, to calculate its full cost.