The Term "Market Failure

question 18

Multiple Choice

The term "market failure"

• A)means the same thing as "market power."
• B)refers to the dissolution of a market when firms decide to quit producing a certain product.
• C)refers to the failure of a market to produce an efficient allocation of resources.
• D)refers to government's failure to enforce the property rights of households or firms that participate in a certain market.

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Definitions:

Budgeted

Relates to the financial plan that estimates future revenue and expenses over a specific time period.

Denominator Level

In cost accounting, it refers to the total amount of allocation base (e.g., direct labor hours, machine hours) that is used to calculate the predetermined overhead rate.

Standard Cost System

A cost accounting method that assigns expected costs to products to help in setting budgets and analyzing cost variances.

Volume Variance

The variance that arises whenever the standard hours allowed for the actual output of a period are different from the denominator activity level that was used to compute the predetermined overhead rate. It is computed by multiplying the fixed component of the predetermined overhead rate by the difference between the denominator hours and the standard hours allowed for the actual output.