The primary force encouraging the entry of new firms into a purely competitive industry is:
A. normal profits earned by firms already in the industry.
B. economic profits earned by firms already in the industry.
C. government subsidies for start-up firms.
D. a desire to provide goods for the betterment of society.
Answer: B
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Based on your understanding of your roommate's preferences, you predict that he will select the spaghetti for his lunch at the cafeteria, but instead he chooses the gyros. How do you describe this event in terms of economic theory?
A) Your roommate is irrational. B) Your roommate does not know what is in his own best interests. C) You roommate does not know his own preferences as well as you do. D) You constructed a model that made a prediction, and the prediction was refuted.
A benefit of deductibles and health savings accounts is that they
A) reduce the moral hazard problem associated with third-party payers. B) increase the quality of health care. C) reduce the use of expensive techniques for hopeless cases. D) reduce the incomes of physicians.
Adverse selection in insurance requires that
a. all people face the same risk b. potential customers facing more risk are more interested in purchasing insurance c. people are not risk averse d. insurers can tell higher risk people from lower risk people
The change in output caused by a one-unit change in labor is referred to as the
A. compounded physical product of labor. B. total product of labor. C. average product of labor. D. marginal product of labor.