One Way to Take Advantage of Economies of Scale and to Avoid

question 223

Multiple Choice

One way to take advantage of economies of scale and to avoid the market power of a natural monopoly in the short run is through:

• A) price control.
• B) privatizing the monopoly.
• C) breaking up the monopoly into several smaller companies.
• D) penalty.

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Definitions:

Activity Cost Pools

Groupings of all costs associated with particular activities, which are then allocated to products or services based on their use of those activities.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing a more accurate reflection of the costs incurred by products or services.

Plantwide Overhead Rate

A single overhead rate calculated by dividing total indirect costs by total base units, used throughout an entire manufacturing plant.

Manufacturing Overhead

All indirect costs associated with manufacturing, not including direct materials and direct labor.