In Order to Maximize Profits,firms Must Produce at the Lowest

question 62

Multiple Choice

In order to maximize profits,firms must produce at the lowest possible cost.However when producing at a cost that is higher than necessary:

• A)a monopoly firm can continue to operate with lower profits but a competitive firm will have to exit the market.
• B)a monopoly firm has the incentive to lower cost and increase profit but a competitive firm will increase price and remain in the market.
• C)a monopoly firm will expand output and increase price while a competitive firm will not change output or price.
• D)a monopoly firm has the incentive to produce at the lowest cost possible while a competitive firm will only earn a lower economic profit.

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Definitions:

Automotive Engines

The power units of vehicles, designed to convert fuel into mechanical energy to enable motion.

Labor Rate Variance

The difference between the actual labor rate paid and the standard labor rate expected, indicating over or underpayment.

Budget Variance

The difference between the budgeted amount of expense or revenue, and the actual amount of expense or revenue incurred.

Volume Variance

The difference between the budgeted fixed overhead and the applied fixed overhead, which is usually driven by a difference in actual production volume and the expected production volume.