A Constant-Cost Industry

question 103

Multiple Choice

A constant-cost industry

• A) is one in which an increase in demand is matched by a proportional increases in long-run supply.
• B) generates increasing profits whenever demand increases because the new long-run equilibrium price is above the old price even though average costs have not changed.
• C) has a horizontal long-run supply curve.
• D) has a downward sloping long-run supply curve.

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Definitions:

Direct Materials

Key substances exclusively used in the generation of specific products or execution of services.

Period Cost

Costs that are expensed in the period in which they are incurred, typically related to selling, general, and administrative activities rather than production.

Selling and Administrative Expense

The combined total of all expenses directly related to the selling of products and the administration of a business.

Direct Materials

Raw materials that can be directly traced to the production of a specific product and are an integral part of the finished product.