Suppose That the Only Maker of a Particular Type of Horse

question 44

Multiple Choice

Suppose that the only maker of a particular type of horse hair clothing exits the industry because demand is too low.The correct analysis of this situation is that

• A)the producer's decision is irrational, since monopolies are not limited by the demand curve
• B)the producer's decision is irrational, since monopolies never go out of business
• C)the producer's decision is irrational, since it could simply raise the price
• D)the price received by the producer was lower than the marginal cost in the long run
• E)the price received by the producer was lower than the average total cost in the long run

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Definitions:

Equity Method

An accounting technique used for recording investments in which the investor has significant influence over the investee, typically between 20% and 50% ownership.

Disposal of Equipment

The process of getting rid of fixed assets or equipment which is no longer useful or needed through sale, trade, or recycling.

Treasury Stock

Shares that were issued and subsequently repurchased by the issuing company, reducing the amount of outstanding stock on the open market.

Depreciation Expense

Depreciation Expense is the allocation of the cost of a tangible asset over its useful life, reflecting wear and tear, obsolescence, or other decline in value.