When Existing Firms in a Competitive Market Are Profitable, an Incentive

question 438

Multiple Choice

When existing firms in a competitive market are profitable, an incentive exists for

• A)new firms to seek government subsidies that would allow them to enter the market.
• B)new firms to enter the market, even without government subsidies.
• C)existing firms to raise prices.
• D)existing firms to increase production.

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Definitions:

Machine-Hours

The total hours that machinery is operated during a specific period for production purposes.

Departmental Predetermined Overhead Rates

These rates are calculated to allocate manufacturing overhead costs to specific departments, based on estimated or actual overhead and activity levels.

Machine-Hours

A measure of production time using machinery; used as a basis for allocating manufacturing overhead costs to products.

Machine-Hours

A measure of the total time that machines are operating during a specific period.