Which One of the Following Statements Is True About a Monopolistically

question 5

Multiple Choice

Which one of the following statements is true about a monopolistically competitive firm in long-run equilibrium?

• A)Its output is larger than it would be under conditions of perfect competition.
• B)Its average cost is lower that it would be under conditions of perfect competition.
• C)It is producing at economic capacity just as it would be under conditions of perfect competition.
• D)Its price is equal to its marginal cost just as it would be under conditions of perfect competition.
• E)None of the choices are correct.

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Definitions:

Direct Materials Cost

The expense associated with the raw materials directly used in the production of a product.

Cost Behavior Classifications

The categorization of costs based on how they change in relation to changes in a company’s level of activity or volume.

Activity Base

A measure upon which the allocation of costs is based in activity-based costing, often relating to a metric that causes costs to occur such as machine hours or labor hours.

Cost Behavior

The way in which costs change in relation to variations in an organization’s activity level.