Keith Is a Perfectly Competitive Carnation Grower

question 166

Multiple Choice

Keith is a perfectly competitive carnation grower.The market price is $2 per dozen carnations.Keith's average total cost to grow carnations is $2.50 per dozen.In the long run,Keith will

• A) raise his price to more than $2.50 per dozen carnations.
• B) raise his price to $2.50 per dozen carnations.
• C) exit the industry if the price and his costs do not change.
• D) incur an economic loss.
• E) continue to make an economic profit.

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Definitions:

Cash-flow Management

The process of monitoring, analyzing, and optimizing the net amount of cash receipts minus cash expenses.

Net Profit Margin

A financial metric that measures how much of every dollar earned in revenue is translated into profit after all expenses are deducted.

After-tax Profit

The amount of net income left over after all taxes have been deducted from total revenues.

Inventory Turnover

A measure of how many times a company’s inventory is sold and replaced over a period, indicating efficiency in inventory management.