An Industry Has a Single Firm and Is Found to Have

question 157

Multiple Choice

An industry has a single firm and is found to have violated antitrust laws. The government breaks it up into two firms that will share the market equally. The Herfindahl index for this industry would change from

• A) 100 to 50.
• B) 10,000 to 2,500.
• C) 100,000 to 50,000.
• D) 10,000 to 5,000.

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Definitions:

Multiple Overhead Rate

The use of more than one overhead rate to allocate a company's indirect costs more accurately than a single overhead rate.

Plantwide Overhead Rate

A single overhead absorption rate used throughout an entire plant or factory, applied uniformly to all cost objects.

Labor-Intensive

Describes a process or industry that requires a high input of labor compared to capital.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate estimated overhead costs to products or services based on a certain activity base.