Suits Only,a Dry-Cleaning Firm That Specializes in Cleaning Business Suits,operates

question 30

Multiple Choice

Suits Only,a dry-cleaning firm that specializes in cleaning business suits,operates in a perfectly competitive market.Robin Smith,an exceptionally talented manager,has been hired to manage Suits Only.In the dry-cleaning business,a manager typically makes a salary of $400 per week.Suits Only faces the long-run average and marginal costs shown in the figure below.In long-run competitive equilibrium,the market price for cleaning a business suit is $4.50. Given the above,the typical dry-cleaning firm has a minimum long-run average cost of cleaning a business suit equal to $________ and the typical dry-cleaning firm earns economic profit equal to $______.

• A)$4.50,$0
• B)$2,$2.50 per suit cleaned
• C)$3,$1.50 per suit cleaned
• D)$2,$0

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Definitions:

Temporary Difference

A difference between the carrying amount of an asset or liability in the balance sheet and its tax base, which will result in taxable or deductible amounts in the future.

Book Income

The income of a business as reported in its financial statements, using the accounting methods and standards specified by the relevant authority.

Deferred Tax Liability

A tax obligation that a company owes but is not required to pay until a future date.

Warranty Expense

Costs that a company incurs to repair, replace, or compensate for faulty products during the warranty period.