Use This Information to Answer the Following Question

question 87

Multiple Choice

Use this information to answer the following question. In addition, beginning merchandise inventory was $22,000 and ending merchandise inventory was $14,000.
If beginning and ending merchandise inventories were ignored in computing net income, then net income would be

• A) understated by $22,000.
• B) overstated by $8,000.
• C) understated by $14,000.
• D) understated by $8,000.

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Definitions:

ATC Curve

The Average Total Cost curve represents the per-unit cost of production (fixed plus variable costs) at different levels of output.

Efficient

The optimal use of resources to achieve the desired ends with minimal waste or effort, often related to production and allocation.

Economy

A system by which goods and services are produced, distributed, and consumed.

Long-Run Equilibrium

A situation in which all firms in a market are making zero economic profit, leading to a stable market condition where no new firms enter or exit.