What Happens in a Perfectly Competitive Industry When Economic Profit

question 66

Multiple Choice

What happens in a perfectly competitive industry when economic profit is greater than zero?

• A) Existing firms may get larger.
• B) New firms may enter the industry.
• C) Firms may move along their LRAC curves to new outputs.
• D) There may be pressure on prices to fall.
• E) All of the above may occur.

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Definitions:

Paid-in Capital

The amount of money that a company receives from issuing shares of stock, recorded in the shareholders' equity section of the balance sheet.

Scrip Dividend

A method of paying dividends in the form of additional shares instead of cash.

Earnings Per Share

A financial ratio that measures the portion of a company's profit allocated to each outstanding share of common stock.

Declaration Date

The specific day on which a company’s board of directors announces its intent to pay a dividend to shareholders.