Beginning from a Long Run Equilibrium in a Competitive Industry,if

question 83

Multiple Choice

Beginning from a long run equilibrium in a competitive industry,if there is a substantial,permanent increase in demand for industry output:

• A) firms will enter the industry, the quantity produced will rise, and prices will end up lower than their initial long run equilibrium level.
• B) firms will enter the industry, the quantity produced will rise, and prices will end up higher than their initial long run equilibrium level.
• C) firms will enter the industry, the quantity produced will rise, and prices will end up at the same level as their initial long run equilibrium level.
• D) firms will enter the industry, the quantity produced will rise, and but without more information, we cannot know if prices will end up higher than their initial long run equilibrium level.

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Definitions:

Traditional Costing System

A method of cost accounting that allocates factory overhead to products based on volume-driven measures such as machine hours or labor hours.

Manufacturing Overhead

Consists of all manufacturing costs that are not directly associated with the production of goods, including indirect labor, maintenance, and factory utilities.

Direct Labor-Hours

The compiled working hours of employees directly active in manufacturing tasks.

Activity-Based Costing

A method of allocating overhead and indirect costs to specific products or projects based on their consumption of resources.