If an Industry Earns a Return on Capital in Excess

question 40

Multiple Choice

If an industry earns a return on capital in excess of its cost of capital:

• A)It will soon attracts the attention of competition authorities
• B)Workers will push for higher pay and benefits causing the level of profitability to fall
• C)It will attract the attention of potential entrants and,unless protected by high barriers to entry,the return on capital will fall
• D)Firms within the industry will over-invest causing the return on capital to fall

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Definitions:

Social Conventions

Agreed-upon rules and norms that govern social behavior and interactions among individuals within a society.

School-Age Children

Refers to children who are in the age range typically required to attend primary and secondary school, usually between 5 and 18 years of age.

Contingent

Dependent on or conditioned by something else; conditional.

Authority

The power or right to give orders, make decisions, and enforce obedience, often accompanied by respect or recognition from those subject to the authority.