GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Excluded from the prime cost
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Is considered to be negligible and thus, ignored
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Is charged along with the price of the commodity
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Is considered to be vital for the calculation of total cost
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Detailed explanation-1: -Under the perfect competition the transportation cost is cosidered to be negligible and thus, ignored. Perfect competition is a form of the market in which there is a large number of buyers and sellers and where homogeneous product is sold at a uniform price.
Detailed explanation-2: -The law of one price takes into account a frictionless market, where there are no transaction costs, transportation costs, or legal restrictions, the currency exchange rates are the same, and that there is no price manipulation by buyers or sellers.
Detailed explanation-3: -On the monopolistic competition product market, the average cost of the producer (right part of Fig. 1) is equal to the price (AC 0 ΒΌ P 0 ), as a result of entry and exit. Subsequently, transport costs fall from T 0 to T 1 .