Even if two competitive firms in the same market have different production technologies, they will each earn long-run zero profits. Why?

What will be an ideal response?


The firm that has more productive resources will have the cost of those resources bid up by the marketplace. The more productive the resource, the more expensive it will be. This price is bid up until the firm's profits are zero. The firm with less productive resources will also have zero profits because it is not paying as much for its resources. There is no such thing as a free lunch or a free productivity gain for competitive firms.

Economics

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Moral hazard is:

A. when individuals make exchanges in the grey market. B. the tendency for people to behave in a riskier way when they're insured. C. when one party acts in a way that is ethically outside the norm in a market exchange. D. when both parties act in a way that is ethically outside the norm in a market exchange.

Economics

Other things the same, if a country raises its saving rate, when is growth of real GDP per person higher?

a. as the economy moves toward the long run and in the long run. b. as the economy moves toward the long run, but not in the long run. c. in the long run, but not as the economy moves toward the long run. d. neither as the economy moves toward the long run, nor in the long run.

Economics

Faced with the gamble: heads you win $100; tails you lose $50, we would predict that a risk-neutral person would

A. refuse the gamble. B. take the gamble but insure against any loses. C. be indifferent between taking and not taking the gamble. D. take the gamble.

Economics

If the price of good X falls and the demand for good X is unit elastic, then the percentage rise in quantity demanded is __________ the percentage fall in price, and total revenue __________.

A) greater than; rises B) less than; falls C) equal to; remains constant D) greater than; falls E) less than; rises

Economics