Netflix introduced DVD rentals via US Mail whereby customers do not have to leave their home to rent movies. They also introduced the concept of no-late fees. Netflix has enjoyed strong profits over the last few years
However, what does economic theory tell us should happen to these profits in the long run and why?
In the long run these profits will probably be competed away. Blockbuster has already responded by offering the same service. In addition, Blockbuster customers can return their movies to one of their retail locations in addition to mailing them back.
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Respond to the following statement with a brief explanation: "The Federal Reserve can improve the performance of the stock market but it cannot prevent a stock market crash."
What will be an ideal response?
Suppose that Jacob is going to a buffet restaurant that allows him to eat as many chicken wings as he wants at a fixed price. How would you predict the number of chicken wings that Jacob will eat using utility theory?
What will be an ideal response?
In comparing accounting profit with economic profit, we generally find that
A. accounting profit is less than economic profit. B. economic profit exceeds accounting profit by the amount of opportunity costs. C. economic profit and accounting profit are the same in the short run. D. accounting profit is greater than economic profit.
Shocks to the economy occur when:
A. stock prices rise by more than 10 percent per year. B. government takes a more active role in the economy. C. prices are flexible. D. actual economic events do not match what people expected.