Explain why on average the profit levels for invention and entrepreneurship are generally so low.
What will be an ideal response?
Although a new invention initially implies a higher rate of return at or near the level of monopoly profits, eventually additional competitors will enter the market producing substitutes. This competition implies that economic profits will move toward zero. In addition, there are a number of inventions that ultimately are not successful. These facts coupled with the excessive optimism of entrepreneurs and nonfinancial, psychological rewards for invention lead us to expect a low or even negative overall rate of return on invention.
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Opportunity cost can always be measured in money terms.
Answer the following statement true (T) or false (F)
Within the production possibilities frontier (PPF) framework, choice is depicted by the
A) PPF itself. B) PPF being bowed outward. C) need to select among the points making up the PPF. D) straight-line PPF.
A company producing sports equipment wishes to increase its total revenue. Should it increase or decrease its price when the product's price elasticity of demand is equal to -0.8?
(a) Increase - the good is price inelastic and in order to increase TR the firm should increase its price. (b) Decrease - the good is price elastic and in order to increase TR the firm should decrease its price. (c) Increase - the good is price elastic and in order to increase TR the firm should increase its price. (d) Decrease - the good is price inelastic and in order to increase TR the firm should decrease its price.
Real business cycle theory explains the business cycle as the result of
a. unstable investment demand. b. excess growth of the quantity of money. C. shocks to consumer spending habits d. fluctuations in productivity.