In the Long Run, Neither Competitive Price Takers nor Competitive

question 17

Multiple Choice

In the long run, neither competitive price takers nor competitive price searchers will be able to earn economic profits because

• A) entry barriers into these markets are high, raising the costs of each firm.
• B) the government will dictate moderate prices for these firms.
• C) competition will force prices down to the level of per-unit production costs.
• D) marginal revenue is always less than marginal cost when barriers to entry are low.

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Definitions:

Treasury Stock

Shares that were first put into circulation by a company and then taken back, diminishing the quantity of shares actively traded on the market.

Small Stock Dividend

A dividend paid in the form of additional shares of the issuing corporation, typically representing less than a 25% increase of the outstanding shares.

Retained Earnings

The portion of net income that is retained by the corporation rather than distributed to its owners as dividends.

Additional Paid-In Capital

Additional paid-in capital is the amount of money that shareholders have paid for shares above the stated par value during issuance, representing excess funds contributed by shareholders.