Purely Competitive Industry X Has Constant Costs and Its Product

question 70

Multiple Choice

Purely competitive industry X has constant costs and its product is an inferior good. The industry is currently in long-run equilibrium. The economy now goes into a recession and average incomes decline. The result will be

• A) an increase in output and in the price of the product.
• B) an increase in output, but not in the price, of the product.
• C) a decrease in the output, but not in the price, of the product.
• D) a decrease in output and in the price of the product.

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Definitions:

Standard Direct Labor

The expected amount of labor time and cost necessary to produce one unit of product under normal conditions.

Power Cost

The expense incurred by a company for the electricity used in its operations.

Automotive Engines

The specific units within vehicles that convert fuel into mechanical power, allowing the vehicle to move.

Materials Quantity Variance

The discrepancy between what was actually used in terms of material for production and what was anticipated, times the standard cost for each unit.