Niceville, Ohio, Only Has Two Dentists, While the Surrounding Communities

question 21

Essay

Niceville, Ohio, only has two dentists, while the surrounding communities have many more on a per capita basis. The demand for dental services is such that these two dentists could agree to raise their prices (they play golf together every Saturday) and earn economic profit. Instead, they choose to price competitively and earn what other dentists earn. What might explain this?

---

Definitions:

Impairment Loss

A decrease in the recoverable value of an asset below its carrying amount, prompting a write-down of the asset's value on the financial statements.

Cash Generating Units

A segment of a company's operations that independently generates cash flows from its activities.

Carrying Amount

The amount at which an asset is recognized in the balance sheet after deducting any accumulated depreciation (amortization) and accumulated impairment losses.