If a Competitive Firm Routinely Earns a Larger Profit Than

question 80

Multiple Choice

If a competitive firm routinely earns a larger profit than the "normal profit" for its industry

• A)the firm's owners are likely to withdraw from the industry in order to retire early.
• B)new firms are likely to enter the industry, pushing up the prevailing market price.
• C)new firms are likely to enter the industry, depressing the prevailing market price.
• D)the firm will continue to earn its "normal profits" far into the future.

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Definitions:

Inventory Level

Represents the quantity of goods or materials a company holds at a particular time, crucial for meeting production and sales demands.

Short-term Financing

Short-term financing refers to borrowing funds for a period of less than one year, often used for immediate cash flow needs.

Long-term Financing

Funding obtained for a time frame exceeding one year, used for acquiring assets, structuring mergers or acquisitions, and supporting expansive business activity.

Flotation Costs

The complete expenses a company faces while issuing new securities, such as fees for underwriting, legal matters, and registration.