(Table: Decision to Enter) Use the Table

question 86

Multiple Choice

(Table: Decision to Enter) Use the table. A firm is consideringwhether to enter an industry, with the conditions upon entryset forth in the table. Entering the industry would require thefirm to pay $800 per day in fixed costs. This firm should________ the industry because its profits would be ________per day.

• A)not enter; -$1,350
• B)not enter; -$800
• C)enter; $700
• D)enter; $150

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Definitions:

Economic Profit

The distinction between aggregate income and comprehensive charges, covering both manifest and inferred expenses.

Opportunity Cost

The value of the best alternative foregone when making a decision.

Equity Capital

Funds raised by a company through the sale of stock in the company, representing ownership interests in the corporation.

Economic Profit

The total revenue of a business minus both its explicit costs (like wages and materials) and its implicit costs (like opportunity costs), reflecting the true financial gain.