Refer to the Graphs Shown, Which Depict a Perfectly Competitive

question 70

Multiple Choice

Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand increases from D₀ to D₁, in the short run:

• A)market price rises from P₀ to P₁ and the firm's output rises from q₀ to q₁.
• B)market price rises from P₀ to P₁ and the firm's output rises from Q₀ to Q₁.
• C)market price remains at P₀ because perfectly competitive firms can't earn positive economic profit.
• D)the firm's output remains at q₀ because perfectly competitive firms can't earn positive economic profit.

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Definitions:

Percent of Sales Method

A financial analysis technique used to forecast future expenses or account balances as a percentage of sales revenue.

Direct Write-off Method

An accounting method where uncollectible accounts receivable are written off directly against income at the time they are deemed noncollectible.

Uncollectible Receivables

Receivables considered uncollectible by a company and therefore recorded as a loss.

Journalize

The process of recording transactions in the general journal using the double-entry bookkeeping system.