The Representative Firm in a Purely Competitive Industry

question 136

Multiple Choice

The representative firm in a purely competitive industry

• A) will always earn a profit in the short run.
• B) may earn either an economic profit or a loss in the long run.
• C) will always earn an economic profit in the long run.
• D) will earn zero economic profit in the long run.

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Definitions:

Investment Date

The specific date on which an investment was made or acquired, which is important for calculating holding periods, interest, dividends, and capital gains.

Capital Investment Analysis

The process of evaluating the advisability of investing in long-term assets, based on potential returns.

Present Value

A rephrased definition denoting the current value of a future amount of money discounted at a particular rate of return.

Internal Rate of Return

A financial metric used to evaluate the profitability of potential investments, calculated as the discount rate that makes the net present value of all cash flows from a particular project equal to zero.