Use the following graphs for a perfectly competitive market in the short run to answer the next question. Which of the following statements is true? rev: 06_26_2018 Multiple Choice

a. The firm should increase production in the short run.

b. The firm is generating a loss.

c. The firm is earning a normal profit.

d. The firm is making economic profits.

The corret answer is b. The firm is generating a loss.

Explanation:

The word loss is used to refer to situations with negative results. Negative results will arise when the expenses exceed the income.

It is key to keep in mind that an expense will generate the possibility of obtaining income, while a loss will not create the present or future possibility of obtaining income as a result of it. Some examples of accounting losses may be damaged goods or deterioration in the value of the shares.

In order to talk about an accounting loss, the following circumstances must occur:

That a negative result occurs as a result of an operation or group of operations. It may or may not be the result of a transaction with third parties and they have no compensatory value for the company.