The Principal Difference Between Depreciation Expense and Most Other Types

question 187

Multiple Choice

The principal difference between depreciation expense and most other types of expenses is that depreciation

• A) can be avoided if the asset is in as good condition as when it was purchased.
• B) does not require an immediate cash outlay.
• C) is not deductible if it will cause a net loss.
• D) is subject to more precise measurement.

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Definitions:

Long-run Equilibrium

A state in which all factors of production and costs are variable, allowing firms to make adjustments until they reach a point of no economic profit or loss.

Perfectly Competitive Market

A market structure characterized by numerous small firms, identical products, and easy entry and exit, leading to a situation where no single firm can influence market prices.

Average Total Cost

The total cost of production divided by the quantity of output produced; encompasses both fixed and variable costs.

Long-run Equilibrium

A state where all the factors of production in an economy are being used in the most efficient way, leading to a situation where there is no tendency for change.