Suppose a Firm Operates in the Short Run at a Price

question 208

Multiple Choice

Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect

• A)new firms to enter the market.
• B)the market price to fall.
• C)its profits to fall.
• D)All of the above are correct.

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Definitions:

Preemptive Rights

The rights that allow existing shareholders to purchase additional shares before new shareholders can buy them, in order to maintain their proportionate ownership in the company.

Cumulative

Cumulative refers to the total amount accumulated over a series of periods, often used in the context of dividends or other accumulative data.

Undeclared Dividends

Dividends that have been earned by shareholders but have not yet been declared by the company's board of directors.

Prior Claim

A legal right or financial obligation that takes precedence over others, typically in the context of creditors in bankruptcy proceedings.