The Apple Market Is Perfectly Competitive and Is in Long-

question 98

Multiple Choice

The apple market is perfectly competitive and is in long- run equilibrium. Now a disease kills 50 per cent of the apple orchards. In the short run, the price of a bag of apples _______ and the remaining apple growers make _______ economic profit. In the long run, the _______.

• A) increases; zero; price of apples will return to its original level
• B) increases; zero; orchards will be replanted and economic profit will return to zero
• C) increases; positive; orchards will be replanted and economic profit will return to zero
• D) remains the same; zero; orchards will be replanted and growers will make normal profits

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Definitions:

Equity Method

An accounting technique used to record investments in other companies, where the investment gives the investor significant influence over the investee.

Fair Value

Fair value refers to the estimated market value of an asset or liability, reflecting the price at which it could be exchanged between knowledgeable, willing parties in an arm's length transaction.

Equity Method

A financial accounting approach for assessing investments in which an investor has significant influence over an associate, reflecting share in profits or losses.

Selling Price

The amount for which a good or service is sold to the customer.