The Figure Given Below Shows the Revenue and Cost Curves

question 54

Multiple Choice

The figure given below shows the revenue and cost curves of a monopolistically competitive firm.Figure 12.4
MR: Marginal revenue curve
ATC: Average total cost curve
MC: Marginal cost curve
-Wal-Mart created a competitive advantage with its inventory system to reduce the ratio of cost of goods sold to sales, expecting:

• A)to enjoy huge economic profits forever.
• B)that its rivals will never imitate their strategy and it will continue to enjoy positive economic profits.
• C)that its rivals will immediately do the same thing and it will end up earning zero profits.
• D)to enjoy economic profits for a few years before its rivals caught up.
• E)that it will at least be able to cover its fixed costs.

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Definitions:

Activity-Based Costing

An accounting method that assigns costs to products based on the activities they require, such as ordering materials or setting up machinery.

Product Costs

Encompasses all costs incurred to create a product, including direct materials, direct labor, and manufacturing overhead.

Direct Labor

The expenses related to the salaries of workers who are actively engaged in creating products or providing services.

Direct Materials

Raw materials that are directly involved in the production of a product and can be easily traced to it.