Firms Leave a Competitive Industry in the Long Run When

question 133

Multiple Choice

Firms leave a competitive industry in the long run when

• A)price is less than the minimum of marginal cost.
• B)price is less than the minimum of average variable cost.
• C)the return on investment is less than 10 percent.
• D)price is less than the minimum of average total cost.
• E)price is equal to the minimum of average total cost.

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Definitions:

Conversion Cost

The sum of direct labor and manufacturing overhead costs, representing the expenses necessary to convert raw materials into finished goods.

Materials

Substances or components that are used in the manufacturing or production process to create goods and products.

Molding Department

A specific section within a manufacturing facility dedicated to the process of shaping materials using rigid frames or models called molds.

Conversion Costs

The combined costs of direct labor and manufacturing overheads, which are incurred to convert raw materials into finished products.