What are two strategies that entrepreneurs use to earn more than the normal profit? Will these strategies earn economic profits that normally persist over time? Explain
What will be an ideal response?
The first strategy would be to try to lower the cost of production through using better technology or improved organization. If costs are lowered and revenues remain the same or increase, then the innovative firm can earn above-normal profits. The second strategy would be to develop a new product that is popular with consumers so that the entrepreneurs have a degree of pricing power over the profit and a protected position. These advantages, however, do not typically persist over time. With the first strategy, other firms may adopt the same innovation and thus be able to lower their production costs. With the second strategy, other firms will work to develop alternative versions of a new product that was originally popular with consumers and thus undercut the pricing power and capture market share. In the long run, even competition in industries with technological change and innovation will reduce above-normal profits.
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As an economic expansion approaches its peak, it is very likely that real GDP will
A) exceed nominal GDP. B) exceed potential GDP. C) equal nominal GDP but not potential GDP. D) be less than potential GDP. E) equal nominal GDP and equal potential GDP.
When an imported good has restrictions are placed on it that limits the amount that can be imported and as a result the price of the good increases, the demand curve for that good will
A) shift rightward. B) shift leftward. C) become steeper. D) be unaffected.
The _____ is the interest rate at which banks make overnight loans to other banks
Fill in the blank(s) with correct word
A majority of states have a minimum wage that is higher than the federal minimum wage.
Answer the following statement true (T) or false (F)