Scenario 8.1: Two Soft-Drink Firms, Fizzle & Sizzle, Operate on a River

question 25

Multiple Choice

Scenario 8.1:
Two soft-drink firms, Fizzle & Sizzle, operate on a river. Fizzle is farther upstream, and gets cleaner water, so its cost of purifying water for use in the soft drinks is lower than Sizzle's by $500,000 yearly.
-According to Scenario 8.1, Fizzle and Sizzle:

• A) would be perfectly competitive if their purification costs were equal; otherwise, not.
• B) would be perfectly competitive if it costs Fizzle $500,000 yearly to keep that land.
• C) may or may not be perfect competitors, but their position on the river has nothing to do with it.
• D) cannot be perfect competitors because they are not identical firms.

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Definitions:

Statement of Cash Flows

A financial report that provides aggregate data regarding all cash inflows and outflows a company receives from its ongoing operations, investment, and financial activities.

ASPE

Accounting Standards for Private Enterprises; a set of accounting standards for private companies in Canada, designed to meet the needs of private entities.

Comparative Statement of Income

A financial statement presenting a company's revenues, expenses, and profits over multiple periods for comparison purposes.

Cash Basis

An accounting method where revenues and expenses are recognized only when cash is actually received or paid out, as opposed to when they are incurred.