The Perfectly Competitive Widget Industry Is in Long-Run Equilibrium

question 91

Multiple Choice

The perfectly competitive widget industry is in long-run equilibrium.A profit-maximizing manufacturer receives total revenue of $55,000.He uses his labor, $15,000 worth of wire, and $15,000 worth of steel to make the widgets.The manufacturer

• A)is earning an economic profit of $25,000.
• B)must have an opportunity cost of labor of less than $25,000.
• C)must have an opportunity cost of labor of exactly $25,000.
• D)must have an opportunity cost of labor of more than $25,000.

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Definitions:

Equity Method

An accounting technique used to record an investment, where the investor recognizes income equal to its share of the investee's profit.

Securities

Financial instruments representing ownership (stocks), a debt agreement (bonds), or the rights to ownership (derivatives).

Fair Value

An estimated market value of an asset or liability, reflecting current market conditions rather than historical cost, used in financial reporting.

Adjusting Entries

Journal entries made at the end of an accounting period to allocate income and expenses to the period in which they actually occurred.