In the Short Run a Firm in a Competitive Market

question 2

Multiple Choice

In the short run a firm in a competitive market will produce nothing when:

• A)price is less than SMC.
• B)its maximum profit is negative.
• C)price is less than the minimum value of SAVC.
• D)STC exceeds total revenue.

---

Definitions:

Value In Use

The present value of the future cash flows expected to be derived from an asset, used in impairment testing.

Present Value

The present value of an amount of money or series of cash flows expected in the future, calculated using a particular interest rate.

Future Cash Flows

are the estimated amounts of money expected to be received or paid out by a business over future periods as a result of its operational activities.

AASB 136

The Australian Accounting Standards Board standard concerning the impairment of assets, requiring entities to ensure that asset carrying values are not more than their recoverable amounts.