In a Perfectly Competitive Market

question 260

Multiple Choice

In a perfectly competitive market:

• A)the price will change to reflect any change in production cost.
• B)the existence of profits leads firms to exit the industry,while losses lead firms to enter the industry.
• C)economic profits are positive in the long run.
• D)perfect competition generates prices greater than marginal costs.

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Definitions:

Net Income

Refers to the total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.

Owner, Capital

An account on a company's balance sheet representing the owner's invested equity or interest in the business.

Liability Insurance Policy

Insurance coverage that protects against claims arising from injuries or damages to other people or property for which the insured is liable.

Prepaid Expense

Expenses paid in advance for goods or services to be received in the future, which are recorded as assets until they are actually used.