Suppose That Once a Well Is Dug,water Flows Out of It

question 115

Multiple Choice

Suppose that once a well is dug,water flows out of it continuously without any additional effort.Customers collect their water and pay a per gallon fee when they leave the site of the well.In the short run,the competitive firm in this market

• A) will not shut down because variable costs are zero.
• B) has no fixed costs.
• C) faces diminishing marginal returns.
• D) can act as a price setter.

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Definitions:

Treasury Stock

Shares that were once a part of the outstanding shares of a company but were bought back and are held by the company itself.

Cost Method

An accounting method used to value inventory or investments at their original cost.

Par Value

A nominal value assigned to shares of stock, which may not reflect the actual market value.

Stock Split

A stock split is a corporate action where a company divides its existing shares into multiple shares to boost liquidity, though the overall market capitalization remains unchanged.