In the Long Run, Perfectly Competitive Firms Make Zero Economic

question 203

Multiple Choice

In the long run, perfectly competitive firms make zero economic profit (their owners earn a normal profit) because

• A) any economic profit would attract newcomers to the industry.
• B) the firms are incompetent.
• C) any economic loss would increase the demand for the good, thereby raising its price.
• D) there are many buyers and sellers.

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Definitions:

Sales Discount

Cash discount offered to encourage prompt payment of an account receivable.

Account Receivable

Debts owed by clients to a firm for delivered goods or services awaiting payment.

Collection

The process of obtaining funds that are due or the grouping of specific items or data, often relevant in financial contexts and research.

Annual Interest Rate

The percentage that represents the cost of borrowing money or the gain from saving money on an annual basis, crucial for financial calculations.