Which of the Following Statements Is True of Expenses

question 131

Multiple Choice

Which of the following statements is true of expenses?

• A)Expenses increase owner's equity, so an expense account's normal balance is a credit balance.
• B)Expenses decrease owner's equity, so an expense account's normal balance is a credit balance.
• C)Expenses increase owner's equity, so an expense account's normal balance is a debit balance.
• D)Expenses decrease owner's equity, so an expense account's normal balance is a debit balance.

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Definitions:

Economic Profits

The surplus generated when total revenues exceed the total costs, including both explicit and implicit costs.

Efficiency

The optimal allocation and use of resources to produce goods and services in the most cost-effective and waste-free manner.

P > MC

Indicates a scenario in price (P) is greater than marginal cost (MC), suggesting that a firm could potentially increase profits by increasing production since each additional unit produced costs less than the price it would sell for.

Monopoly

A market structure in which a single seller controls the entire market for a good or service, with no close substitutes.