If a Purely Competitive Constant-Cost Industry Is Realizing Economic Profits

question 148

Multiple Choice

If a purely competitive constant-cost industry is realizing economic profits, we can expect industry supply to

• A)increase, output to rise, price to fall, and profits to fall.
• B)increase, output to rise, price to rise, and profits to fall.
• C)decrease, output to fall, price to rise, and profits to fall.
• D)increase, output to fall, price to fall, and profits to fall.

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Definitions:

Ending Inventory

The total value of goods available for sale at the end of an accounting period, calculated using various valuation methods like FIFO, LIFO, or average cost.

FIFO Method

"First In, First Out," an inventory valuation method where goods produced or acquired first are sold, used, or disposed of first.

Periodic System

An inventory system that updates inventory and cost of goods sold only at the end of the accounting period based on a physical count.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated by adding purchases to beginning inventory and then subtracting the cost of goods sold.