In the long run, perfectly competitive firms earn zero economic profit. Why do firms enter an industry when they know that in the long-run they will not earn any profit?
What will be an ideal response?
Even though in the long run firms earn zero profit, in the interim period they can earn economic profits. Breaking even in the long run means that a firm earns a return comparable to what it could earn in an alternative use of its resources.
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The economy's long run aggregate supply curve
a. is horizontal, indicating that the economy always reaches full employment in the long run. b. is vertical at the full-employment level of output, indicating that the price level is constant in the long run. c. is horizontal, indicating that prices are constant in the long run. d. is vertical at the full-employment level of output, indicating that the economy always reaches full employment in the long run. e. is vertical at the zero budget deficit level of output.
A binding price floor may not help all sellers, but it does not hurt any sellers
a. True b. False Indicate whether the statement is true or false
Reducing government expenditure and increasing taxation is an example of which of the following policies?
(a) An expansionary monetary policy. (b) A contractionary monetary policy. (c) An expansionary fiscal policy. (d) A contractionary fiscal policy.
In the graph showing aggregate demand and aggregate supply after a positive supply shock, we can see that at Point B, ______ at Point A.
a. RGDP is higher than
b. RGDP is lower than
c. price levels are the same as
d. price levels are lower than