When New Firms Have an Incentive to Enter a Competitive

question 209

Multiple Choice

When new firms have an incentive to enter a competitive market, their entry will

• A)increase the price of the product.
• B)drive down profits of existing firms in the market.
• C)shift the market supply curve to the left.
• D)increase demand for the product.

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Definitions:

Statement of Cash Flows

A financial statement that provides an aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.

Operating Activities

Transactions and events that impact the net income of a business, primarily related to its core operations.

Indirect Method

A way of reporting cash flows from operating activities in the cash flow statement, starting with net income and adjusting for non-cash transactions.

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value over time.