The Cotton Industry Is Experiencing Less Than Normal Profits

question 246

Multiple Choice

The cotton industry is experiencing less than normal profits. You can expect some firms to

• A) increase price.
• B) decrease output.
• C) leave the industry in the long run.
• D) enter the industry in anticipation of higher prices.

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Definitions:

Impairment Loss

A reduction in the recoverable value of an asset below its carrying amount on the balance sheet, recognized as a loss.

Recoverable Amount

The higher value between an asset's fair value minus costs of disposal and its value in use.

Carrying Amount

The amount at which an asset or liability is recognized on the balance sheet after deducting any accumulated depreciation, amortization, or impairment.

Fair Value

An estimate of the price at which an asset or liability would be traded between knowledgeable, willing parties in an arm's length transaction.