A Study to Find the Proportion of Earnings Variation Explained

question 13

Multiple Choice

A study to find the proportion of earnings variation explained by market and by industry earnings changes found

• A) market change was significant; industry change was not.
• B) each explained about 20% of the variation on the average.
• C) neither had any explanatory value.
• D) industry change had more explanatory value than market change.

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Definitions:

Accounting Costs

The explicit costs of a business, representing the actual outflows of cash for wages, rent, materials, and other tangible inputs.

Economic Costs

The total cost of choosing one action over another, including both explicit (direct monetary costs) and implicit (opportunity costs) factors.

Long-Run Equilibrium

A state in a market where all resources are optimally allocated and economic forces are balanced, with no tendency for change until external conditions change.

Perfect Competition

A market structure characterized by many sellers and buyers, homogeneous products, and free entry and exit, resulting in price takers.