Industries in which firms are enjoying positive profits are likely to ________ in the long run.
A. expand
B. contract
C. neither expand nor contract, as firms must earn an economic profit to stay in business
D. expand or contract depending on the normal rate of return
Answer: A
You might also like to view...
A carbon tax which is designed to reduce pollution is an example of a
A) noneffective incentive. B) command-and-control policy. C) market-based policy. D) government administrative rule.
Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S1 (point C)
If the price of motorcycle side cars (a complement to motorcycles) decreases, and the wages of motorcycle workers increase, how will the equilibrium point change? A) The equilibrium point will move from C to E. B) The equilibrium point will move from C to B. C) The equilibrium will first move from C to A, then return to C. D) The equilibrium point will move from C to A.
A firm that is first to the market with a new product frequently discovers that there are design flaws or problems with the product that were not anticipated. How do these problems affect the innovating firm?
A) The firm is protected by a first-mover advantage: initial design flaws tend not to harm a firm significantly because consumers resist changing products for fear of incurring high switching costs. B) They reduce profits for the new innovations and open the door to competitors who can enter the new market with a better product. C) The firm's cost increases as it improves the product but it will not be able to raise its price for fear of alienating customers. Consequently, its profits will erode although its market share remains secure. D) Because these design flaws were not anticipated, consumers tend to be more forgiving and are likely to remain loyal to the company and its products.
The owners of a corporation are
A) the employees of the firm. B) the shareholders. C) completely in control of the firm. D) taxed only once.