A Firm Operating in a Perfectly Competitive Industry Will Shut

question 111

True/False

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

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Definitions:

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment's initial cost, indicating profitability.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Discount Factor

A multiplier used in time value of money calculations to determine the present value of future cash flows.

Electrocardiogram

A test or record of the electrical activity of the heart over a period of time.