When Entrepreneurs in Competitive Industries Successfully Innovate to Lower Production

question 122

True/False

When entrepreneurs in competitive industries successfully innovate to lower production costs, it usually results in long-run economic profits for the firm.

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Definitions:

Net Income

The net income of a business following the deduction of all taxes and expenses from its overall revenue.

Degree of Operating Leverage

A financial ratio that measures the sensitivity of a company's operating income to its sales volume, indicating how a change in sales will affect profits.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been subtracted from total revenue.

Contribution Margin Ratio

The percentage of sales that exceeds variable production costs, indicating how much of each sales dollar is available to cover fixed costs and generate profit.