Figure 12-17 the Graphs in Figure 12-17 Represent the Perfectly

question 12

Multiple Choice

Figure 12-17 The graphs in Figure 12-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry.
-Refer to Figure 12-17. Which of the following statements is true?

• A) The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit. New firms will enter the market and shift the market supply curve to the left.
• B) The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit, but it would earn a greater profit if it produced at the lowest point on the ATC curve.
• C) The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit. New firms will enter the industry; as a result, the firm will be forced to exit the industry in the long run.
• D) The firm will produce 30 thousands pounds of apples in the short run and earn an economic profit. In the long run the firm will break even.

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Definitions:

Net Sales

The amount of revenue generated by a company after deducting returns, allowances for damaged goods, and discounts.

Modified Accelerated Cost Recovery System (MACRS)

A tax depreciation system in the United States that allows for the accelerated write-off of property under various classifications.

Federal Income Tax

A tax levied by the federal government on the annual earnings of individuals, corporations, trusts, and other legal entities.

Double-declining Balance

A method of accelerated depreciation where the asset’s book value is decreased at double the rate of traditional straight-line depreciation.