When New Entrants into a Competitive Market Have Higher Costs

question 83

Multiple Choice

When new entrants into a competitive market have higher costs than existing firms,

• A)accounting profits will be the primary determinant of entry into the market.
• B)sunk costs become an important determinant of the short-run entry strategy.
• C)market price will rise.
• D)long-run supply is constant.

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Definitions:

Long-Term Capital Losses

Losses incurred from selling assets that have been held for over a year, which can be applied to counterbalance capital gains when calculating taxes.

Short-Term Capital Gains

Profits from the sale of an asset held for one year or less, typically taxed at higher rates than long-term capital gains.

AGI

Adjusted Gross Income, which is total income minus specific deductions, used to calculate tax liability.

Collectibles Tax Rate

The tax rate applied to gains from the sale of collectibles, such as art, stamps, coins, and antiques, which is often different from the rate on other capital gains.