In the Long Run the Prices Charged by a Firm

question 46

Multiple Choice

In the long run the prices charged by a firm in a competitive price-searcher market will be

• A) high enough to provide profits to the firm.
• B) so low that many firms will drop out of the industry.
• C) equal to marginal cost.
• D) equal to average cost, including the opportunity cost of capital.

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Definitions:

Factoring

Factoring is a financial transaction where a business sells its accounts receivable to a third party at a discount in exchange for immediate cash.

Capital Investment Analysis

The process of evaluating the potential returns of an investment in fixed assets or long-term projects versus its costs.

Risk-Return Trade-Off

The principle that potential return rises with an increase in risk.

Leveraged Buyout Analysis

A financial transaction analysis in which a company is purchased using a significant amount of borrowed money to meet the cost of acquisition.