If firms do not earn economic profits in a competitive equilibrium, why would the firms choose to stay in business?
What will be an ideal response?
When firms earn no economic profit but earn a normal profit, they earn precisely as much as they could have earned by investing their time and money elsewhere. In other words, each producer is able to earn sufficient accounting profits to cover the opportunity cost of invested factors (time and money) and to continue operating. The source of the confusion stems from the difference between accounting and economic profits.
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If a country has a high level of growth in income, it:
A. must have a high level of income. B. must be rapidly increasing its GDP per capita. C. must have an equitable distribution of wealth. D. All of these are true.
Will's Franks originally sold hotdogs and soft drinks from a cart located in front of City Hall. Then Will purchased another hotdog cart and hired someone to sell hotdogs and soft drinks near the high school. Both locations have been successful. When Will's Franks expanded to two locations, which of the following did NOT occur?
A. Production increased. B. The company increased the inputs it employs. C. Will's production function changed. D. The firm employed additional capital.
________ arises when people realize they will still receive the benefits of a good whether they pay for it or not.
A. The free-rider problem B. Logrolling C. The drop-in-the-bucket problem D. The voting paradox
A minimum wage is a government-imposed price ________ that is designed to be ________ the equilibrium wage rate
A) ceiling; above B) ceiling; below C) floor; above D) floor; below