Suppose That the Market for Haircuts in a Community Is

question 286

Multiple Choice

Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium.Subsequently,an increase in population increases the demand for haircuts.In the short run,the typical firm is likely to:

• A)earn an economic profit.
• B)incur an economic loss.
• C)have no change in its economic profit.
• D)have neither an economic profit nor an economic loss.

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Definitions:

Market Value

The existing market price for buying or selling an asset or service.

Accounting Profit

Net income as reported on the financial statements, which includes revenue minus expenses, excluding the cost of capital.

Depreciated Value

The reduced valuation of an asset after accounting for wear and tear, age, or obsolescence.

Market Value

The price at which an asset would trade in a competitive auction setting.