Briefly explain Schumpeter’s model of innovation. Why does an innovator’s economic profit eventually reduce to zero?
What will be an ideal response?
Professor Schumpeter argued that the successful innovative entrepreneur’s reward is a monopoly profit, which accrues because the entrepreneur is the first to bring a new product into the market. Having no rivals, that profit temporarily exceeds what can be earned under perfect competition. This high profit attracts imitating rivals who “reverse engineer” the new product and are able to enter the market with their rival product and thereby erode the initial entrepreneur’s “monopolistic” earnings. Eventually, those economic profits will be reduced to zero because entry by imitators will continue as long as earnings are higher than that.
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If bond prices and interest rates are plotted on a graph, the curve has a positive slope.
Answer the following statement true (T) or false (F)
In a perfectly competitive industry, the industry demand curve
A) must be horizontal. B) must be vertical. C) is upward sloping. D) is downward sloping.
Assume that Country X and Country Y are trading partners and the exchange rates are fixed. If prices in Country Y fall, which of the following is expected to happen?
A. Country X will export more. B. Economy of Country X will be depressed. C. Net exports will rise for Country X. D. Country Y will import more.
Dole Co operates in a monopolistically competitive market. Which of the following characterizes Dole Co's market?
A) Dole Co. supplies a small portion of the market's output. B) Dole Co.'s product is slightly different from its competitors. C) Dole Co. faced no barrier to entry when it decided to enter its market. D) All of the above describe Dole Co.'s market.