In Perfect Competition, the Assumption of Easy Entry and Exit

question 271

Essay

In perfect competition, the assumption of easy entry and exit implies that:
A.in the long run all firms in the industry will earn zero economic profits.
B.in the short run all firms in the industry will earn positive economic profits.
C.in the short run all firms in the industry will earn zero economic profits.
D.in the long run all firms in the industry will earn positive economic profits.

Identify the factors influencing a firm's decision to adjust its debt ratio and the principle of the trade-off theory.

Analyze the effect of capital structure on a firm’s weighted average cost of capital (WACC) and its valuation.

Understand the relationship between a firm's operating leverage, business risk, and capital structure.

Recognize the role of market conditions, such as recessions, on firms with different levels of leverage.

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Definitions:

Trauma

A deeply distressing or disturbing experience that can lead to physical, emotional, or psychological harm.

Iconic Memory

A fast-decaying store of visual information; a component of the sensory memory that briefly holds images.

Echoic Memory

A type of sensory memory that holds auditory information for a few seconds after the sound is made.

Consolidation

The process by which memories become stable in the brain, transforming from a short-term to a long-term state.