Suppose That Firms a and B Each Produce High-Resolution Computer

question 360

Multiple Choice

Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. If Firm B produces a monitor that David buys, then the market outcome illustrates which of the following principles?

• A) (i) only
• B) (ii) only
• C) both (i) and (ii)
• D) neither (i) nor (ii)

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Definitions:

Normal Cost System

An accounting system that applies indirect costs to products based on a standard cost rather than actual cost measures.

Cost Flow

The movement and allocation of costs through various stages of production or services, tracking how costs are assigned to products or services.

Standard Costs

Predetermined costs for materials, labor, and overhead that are used as benchmarks for measuring performance.

Controlling Costs

The process of planning, monitoring, and managing expenses to operate within a budget.