Which of the Following Is True of Perfect Competition in the Long

question 202

Multiple Choice

Which of the following is true of perfect competition in the long run?

• A) Firms earn positive economic profit because of economies of scale.
• B) Firms earn positive accounting profit because of government regulations.
• C) Firms earn zero economic profit because of free entry and exit of firms.
• D) Firms earn negative economic profit because of free entry and exit of firms.

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Definitions:

Doubtful Accounts

Accounts receivable that a company does not expect to collect in full, often leading to an allowance for doubtful accounts as a contra asset on the balance sheet.

Allowance Method

An accounting technique used to manage accounts receivable and bad debt expense by estimating uncollectible accounts at the end of each period.

Net Income

The total revenue of a business minus total expenses, representing the profit made during a specific period.

Uncollectible Receivables

Accounts receivable that are considered to be uncollectable and are treated as a loss because payment is no longer expected.