When Firms Are Neither Entering nor Exiting a Perfectly Competitive

question 184

Multiple Choice

When firms are neither entering nor exiting a perfectly competitive market:

• A)total cost must exceed total revenue
• B)economic profits must be zero
• C)banks must be unprepared to forgive bad debts
• D)regulations to enter the market must be very onerous

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Definitions:

Operating Income

Income earned from a firm's regular business operations, excluding deductions of interest and taxes.

Absorption Costing

A costing method where all manufacturing costs, including both fixed and variable costs, are attributed to the product, thus fully absorbing them.

Net Income

The profit of a company after all expenses and taxes have been deducted from total revenue.

Variable Manufacturing Costs

Costs that vary directly with the level of production, including expenses like raw materials and direct labor.