Which of the following conditions is most essential if a firm is going to earn long-run economic profits?
a. an inelastic market demand for the product
b. a small number of firms, even though competitors are free to enter the industry
c. a differentiated product
d. restrictions that limit the entry of potential competitors into the industry
D
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The idea that economic agents do not make systematic errors because they use all information efficiently is called the
A) consistency hypothesis. B) rational expectations hypothesis. C) information efficiency hypothesis. D) principle of maximizing behavior.
The era of Prohibition began in 1920 when the Volstead Act was passed to implement the Eighteenth Amendment to the Constitution, which prohibited the production and sale of liquor and beer. In 1920 much of this activity went underground, and Al Capone became a leading illegal entrepreneur. Assuming the amount of liquor and beer produced stayed the same, what was the effect of the Volstead Act on
the GDP in 1920? a. GDP would have declined, since activities in the underground economy are not included. b. GDP would have remained the same, since only the organization producing the goods changed. c. GDP would have increased, because production in the underground economy increased. d. Real GDP would have increased, while nominal GDP would have decreased.
Tax collections in the United States are an example of
a. tradition in a mainly market system b. command in a mainly tradition system c. market in a mainly tradition system d. tradition in a mainly command system e. command in a mainly market system
The price of a gallon of gasoline at the pump increased by 5 percent at the same time that the inflation rate was also 5 percent. The nominal price of gasoline ________, and the real price of gasoline ________.
A. did not change; increased B. increased; did not change C. did not change; did not change D. increased; decreased