Suppose the GoSports Pennant Monopoly Is Broken Up and the Pennant

question 339

Multiple Choice

Suppose the GoSports pennant monopoly is broken up and the pennant industry becomes perfectly competitive. We would expect the _____ to increase and _____ to decrease after the breakup.

• A) producer surplus; consumer surplus and total surplus
• B) consumer surplus; producer surplus and total surplus
• C) consumer surplus and total surplus; producer surplus
• D) producer surplus and total surplus; consumer surplus

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Definitions:

Variable Costing

A costing method that incluonly direct materials, direct labor, and variable manufacturing overhead in product costs, excluding fixed manufacturing overhead.

Total Fixed Manufacturing Overhead

The sum of all costs related to manufacturing a product that do not change with the level of production, such as salaries of permanent staff and rent.

Variable Costing

An accounting method that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in product costs.

Fixed Manufacturing Overhead

The portion of manufacturing costs that do not vary with the level of production, such as salaries of supervisors and rent for factory buildings.