Consider a Perfectly Competitive Firm When Its Industry Is in Long-Run

question 9

Multiple Choice

Consider a perfectly competitive firm when its industry is in long-run equilibrium.Which of the following statements is correct?

• A)The firm has successfully differentiated its product.
• B)The firm has successfully established barriers to entry.
• C)The firm has a strong profit incentive to expand capacity.
• D)The firm has no ability to affect its product's price.
• E)The firm is earning positive economic profits.

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Definitions:

WorldCom

A telecommunications company that was involved in one of the largest accounting fraud scandals in history, leading to its bankruptcy in 2002.

Volcker Rule

Part of the Dodd-Frank Wall Street Reform and Consumer Protection Act that restricts U.S. banks from making certain kinds of speculative investments that do not benefit their customers.

Proprietary Trading

When a firm trades stocks, bonds, currencies, commodities, derivatives, or other financial instruments with its own money, rather than its clients' money, for its own profit.

Hedge Funds

Investment funds that use various strategies to earn active returns for their investors, often employing leverage and derivatives.