Keith Is a Perfectly Competitive Carnation Grower

question 166

Multiple Choice

Keith is a perfectly competitive carnation grower.The market price is $2 per dozen carnations.Keith's average total cost to grow carnations is $2.50 per dozen.In the long run,Keith will

• A) raise his price to more than $2.50 per dozen carnations.
• B) raise his price to $2.50 per dozen carnations.
• C) exit the industry if the price and his costs do not change.
• D) incur an economic loss.
• E) continue to make an economic profit.

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Definitions:

Partnership

An approved manner of conducting business that involves multiple people sharing control and profits.

Loss On Realization

The loss recognized when assets are sold for less than their carrying amount during the liquidation of a company.

Noncash Assets

Assets that cannot be easily converted into cash, such as machinery, buildings, and inventory.

Capital Balances

The amount of money contributed to a company by its owners or shareholders plus retained earnings.