Which of the Following Creates an Incentive for New Firms

question 3

Multiple Choice

Which of the following creates an incentive for new firms to enter an industry to obtain a share of the profits, thus driving the price down and inducing more goods and services to be produced?

• A) Excess costs
• B) Excess profits
• C) Excess supply
• D) Excess demand

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Definitions:

Losses

Reductions in asset value not related to the normal operations of the business.

Discontinued Operations

Components of a business, such as a department or segment, that have been disposed of or are designated for disposal.

Significant Component

A major part or element of a larger system that plays a critical role in the system's overall function or performance.

Liquidity Ratios

Measures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash.