Suppose that a normal rate of return in the economy is 10% and the rate of return being earned by firms in a competitive industry equals exactly 10%. Which of the following is a correct prediction based on this information?
A. Firms already in the industry will want to expand to try to increase their rate of return.
B. Firms in the industry will not undertake any investment projects other than to replace depreciating capital stock.
C. The industry size will contract.
D. New firms will want to enter this industry, as the existing firms are earning an economic profit.
Answer: B
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Which of the following is not true about the Federal Reserve banks?
A. They serve as bankers' banks. B. They compete with commercial banks in their basic functions. C. Unlike other banks, they are not motivated by profits. D. They are privately owned but government-controlled.
If prices are not stable:
A. money performs better as a unit of account. B. prices become highly useful for conveying information. C. money becomes less useful as a store of value. D. it may be an inconvenience, but resources are still allocated efficiently.
A firm is making zero economic profits. From this, we know that
A) the firm is going to go out of business. B) implicit costs are zero. C) the firm is going to stay in business, but will not be able to attract new financial capital. D) the firm will stay in business since it is covering all relevant opportunity costs.
As a consumer moves rightward along an indifference curve, the
A) consumer remains indifferent among the different combinations of goods. B) consumer generally prefers the combinations of goods farther rightward along the indifference curve. C) income required to buy the combinations of the goods always increases. D) relative price of both goods falls.