A Competitive Price-Taker Firm Would Be Willing to Remain in the Industry

question 148

Multiple Choice

A competitive price-taker firm would be willing to remain in the industry in the long run at zero economic profit because

• A) it would find it too difficult to exit from the industry in the long run.
• B) accounting profit would be negative.
• C) it is covering all costs, including the opportunity cost of capital and labor.
• D) its sunk costs would prevent it from leaving the industry.

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Definitions:

Stock Prices

The current market price of a company's shares, representing the valuation that the market assigns to a single share of the company's stock.

Dividend Policy

A company’s strategy or guidelines set for allocating a portion of its earnings back to its shareholders in the form of dividends.

Automatic Reinvestment

A plan that allows investors to automatically reinvest dividends or capital gains back into the security that generated them.

Dividends

Payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.