Which of the Following Is True of Profits and Losses

question 51

Multiple Choice

Which of the following is true of profits and losses?

• A) Profits direct entrepreneurs toward production of goods that are highly valued relative to their cost, while losses direct them away from wealth-reducing activities.
• B) Profits indicate that the firm is charging prices that are too high, while losses indicate that the firm needs to raise its prices.
• C) Profits indicate that the consumer is getting a bad deal, while losses indicate that the consumer values the product highly relative to its cost.
• D) Profits indicate that the suppliers of resources are underpaid, while losses indicate they are overpaid.

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Definitions:

Short-term Investment

Investments that are made with the intention of converting them into cash within a short period, typically within a year.

Takeover Bid

An offer made by an entity to acquire a controlling interest in another company.

Available-for-sale Securities

Financial assets not classified as held-to-maturity or trading securities, which can be sold in response to needs for liquidity or changes in interest rates, among other reasons.

Recorded

The act of documenting financial transactions in the accounting records.