In the Long Run, a Firm Will Enter a Competitive

question 14

Multiple Choice

In the long run, a firm will enter a competitive industry if

• A)total revenue exceeds total cost.
• B)the price exceeds average total cost.
• C)the firm can earn economic profits.
• D)All of the above are correct.

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Definitions:

Fixed Overhead Rate

A predetermined rate used to allocate fixed overhead costs to units of output, based on a standard level of activity.

Gross Profit

Sales minus the cost of goods sold.

Volume Variance

A measure used in budgeting and accounting to illustrate the difference between expected sales volume and actual sales volume.

Standard Costs

Predetermined costs for manufacturing a product or delivering a service, used as targets or benchmarks.