If firms do not earn economic profits in a competitive equilibrium, then why would the firms choose to stay in business?
What will be an ideal response?
When firms earn no economic profit but earn a normal profit, they earn precisely as much as they could have earned by investing their time and money elsewhere. In other words, each producer is able to earn sufficient accounting profits to cover the opportunity cost of invested factors (time and money) and to continue operating. The source of the confusion stems from the difference between accounting and economic profits.
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According to Adam Smith, what role does individual self-interest play in directing human activity?
What will be an ideal response?
If the price elasticity of demand is zero for all prices, the demand curve is
A. horizontal. B. vertical. C. neither horizontal nor vertical.
The railroad industry in the United States is used as an example of ______.
a. the deadweight loss caused by perfect competition b. government ownership of monopolies c. how monopolies can fail to innovate d. how monopolies are innovators
According to the above table, if the wage rate is $400 a week and the price of the good produced is $5, the perfectly competitive firm should hire
A. 3 workers. B. 4 workers. C. 5 workers. D. 6 workers.