Suppose a Firm Operates in the Short Run at a Price

question 32

Multiple Choice

Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect

• A)new firms to enter the market.
• B)the market price to rise.
• C)its profits to rise.
• D)Both b and c are correct.

Understand negotiation strategies and their application in supplier relationships.

Grasp the importance of make-or-buy decisions and the reasons underlying them.

Understand the principles of supply chain efficiency and the barriers to achieving it.

Understand the principles of compound interest and how it differs from simple interest.

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Definitions:

Direct Labor Hour

The amount of time spent by workers directly on the manufacturing of products or services.

Direct Labor

The expenses associated with the salaries of workers directly engaged in manufacturing products or providing services.

Job Order Costing

A cost accounting system in which costs are assigned to specific jobs or batches, typical in companies that produce unique products or jobs.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to products based on a relevant driver.