Suppose That a Normal Rate of Return in the Economy

question 106

Multiple Choice

Suppose that a normal rate of return in the economy is 10% and the rate of return being earned by firms in a competitive industry equals exactly 10%. Which of the following is a correct prediction based on this information?

• A) New firms will want to enter this industry, as the existing firms are earning an economic profit.
• B) Firms already in the industry will want to expand to try to increase their rate of return.
• C) Firms in the industry will not undertake any investment projects other than to replace depreciating capital stock.
• D) The industry size will contract.

---

Definitions:

Self-Efficacy

Confidence in one's own capability to achieve success in particular circumstances or complete a given task.

Unconditional Positive Regard

A concept in client-centered therapy advocating for accepting and supporting others without judgement.

Myers-Briggs Type Inventory

A self-report questionnaire designed to categorize individuals into sixteen distinct personality types based on preferences in how people perceive the world and make decisions.

Id

In psychoanalytic theory, the part of the psyche that is the source of instinctual impulses and demands for immediate satisfaction of primal needs.