The Authors Explain That a Firm Earning a Zero Economic

question 12

Multiple Choice

The authors explain that a firm earning a zero economic profit in the long run has earned a competitive return on their investment. What do they mean by "competitive" return in this context?

• A) The firm's return could only be earned under perfect competition and would be smaller under imperfect competition.
• B) The firm's return is at least as larger as the returns earned by other firms.
• C) The firm's return is at least as larger as could be earned in another investment.
• D) The firm's return is negative, which initiates stronger competition among firms in the market.

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Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated by dividing current assets by current liabilities.

Current Liabilities

Financial commitments that need to be settled within a year or during the regular operation period of a company.

Current Assets

Assets that a company expects to convert into cash, sell, or consume within one year or its operating cycle, whichever is longer.

Closing

The process of finalizing accounts at the end of an accounting period, transferring temporary account balances to permanent ones.