Asked by
Olivia Dominguez
on Dec 10, 2024
Verified
A competitive price-taker firm would be willing to remain in the industry in the long run at zero economic profit because
A) it would find it too difficult to exit from the industry in the long run.
B) accounting profit would be negative.
C) it is covering all costs, including the opportunity cost of capital and labor.
D) its sunk costs would prevent it from leaving the industry.
Price-Taker Firm
A business that has no control over the market price of its products and must accept the prevailing market price.
Economic Profit
The difference between a firm's total revenue and its total costs, including both explicit and opportunity costs.
Opportunity Cost
The highest valued alternative that must be sacrificed as a result of choosing an option.
- Comprehend the distinction between economic profit and accounting profit in competitive markets.
- Understand the conditions under which firms in a competitive market earn zero economic profit in the long run.
Verified Answer
RA
Learning Objectives
- Comprehend the distinction between economic profit and accounting profit in competitive markets.
- Understand the conditions under which firms in a competitive market earn zero economic profit in the long run.