Briefly explain Schumpeter's model of innovation. Why does an innovator's economic profit eventually reduce to zero?
Professor Schumpeter argued that the successful innovative entrepreneur's reward is a monopoly profit, which accrues because the entrepreneur is the first to bring a new product into the market. Having no rivals, that profit temporarily exceeds what can be earned under perfect competition. This high profit attracts imitating rival who "reverse engineer" the new product and are able to enter the market with their rival product and thereby erode the initial entrepreneur's "monopolistic" earnings. Eventually, those economic profits will be reduced to zero, because entry by imitators will continue as long as earnings are higher than that.
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Explain why only final goods are included in GDP
What will be an ideal response?
An inferior good has a ________ elasticity of demand
A) positive income B) negative income C) negative cross D) positive cross E) negative price
Using the data in the above table
A) the variables quantity and price are positively related. B) the variables quantity and price are negatively related. C) the variables quantity and price are neither positively nor negatively related. D) an increase in price is likely to cause an increase in quantity.
If the price elasticity of demand for a good is greater than one in absolute value, economists characterize that demand is
A) elastic. B) inelastic. C) perfect. D) vertical.