Profits or losses must be temporary for perfectly competitive firms. Why?
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.
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The self-correcting tendency of the economy means that rising inflation eventually eliminates:
A. unemployment. B. exogenous spending. C. recessionary gaps. D. expansionary gaps.
When the price of yen in terms of dollars increases, Honda automobiles from Japan become cheaper to U.S. residents.
Answer the following statement true (T) or false (F)
If $.80 U.S. = $1.00 Canadian,
A. a U.S. nickel is worth four Canadian cents. B. a U.S. quarter is worth 40 Canadian cents. C. 40 Canadian cents are worth 50 U.S. cents. D. $.04 U.S. is worth 5 Canadian cents.
If the economy is at potential output, expected inflation
A. equals the natural rate of unemployment. B. is less than actual inflation. C. equals actual inflation. D. is greater than actual inflation.