Profits or losses must be temporary for perfectly competitive firms. Why?
What will be an ideal response?
Profits must be temporary for perfectly competitive firms because new firms are free to enter the industry if profits greater than the average that they can obtain by investing elsewhere are available in our industry. For the same reason, old firms will leave if they cannot cover their costs in the long run.
You might also like to view...
A country seeking to maintain internal balance would be concerned
A) only with attaining low levels of unemployment. B) primarily with ensuring that saving is weighted more towards domestic investment than the current account. C) with large fluctuations in output or prices. D) with maintaining an adequate stock of gold reserves. E) with stabilizing employment levels globally.
A quota will reduce consumer welfare when
A) the quota is less than the amount purchased without the quota. B) the quota is greater than the amount purchased without the quota. C) the quota is on a good with high income elasticity. D) Quotas always reduce consumer welfare.
A fiscal policy action to close a recessionary gap is to:
A. increase taxes. B. increase the marginal propensity to consume. C. decrease transfer payments. D. increase government purchases.
A useful economic model
A. yields usable predictions and implications for the real world. B. generates statements that are incapable of refutation. C. represents every detail of the real world. D. utilizes only the two most important factors to analyze the problem under consideration.