In a Competitive Market with Free Entry and Exit, If

question 219

Multiple Choice

In a competitive market with free entry and exit, if all firms have the same cost structure, then

• A)all firms will operate at their efficient scale in the short run.
• B)all firms will operate at their efficient scale in the long run.
• C)the price of the product will differ across firms.
• D)Both a and b are correct.

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Definitions:

Net Sales

Revenue from sales transactions after deducting returns, allowances for damaged or missing goods, and discounts.

Working Capital Ratio

A financial metric that measures a company's ability to pay off its short-term liabilities with its short-term assets, indicating liquidity.

Current Liabilities

Short-term financial obligations due within one year or within a company's operating cycle, whichever is longer.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from revenues.