If the Opportunity Cost of Capital Is Below the Rate

question 7

Multiple Choice

If the opportunity cost of capital is below the rate of return to capital in the perfectly competitive beauty salon industry,

• A)resources will flow into the industry.
• B)beauty salon owners must be earning negative economic profit.
• C)the beauty salon industry cannot be in long-run equilibrium.
• D)beauty salon owners must be earning negative marginal revenue at their current levels of output.

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Definitions:

Injections

Additional spending entering the economy, typically through government spending, investment, and exports, which stimulates economic activity.

Circular Flow

An economic model illustrating the continuous flow of goods and services, resources, and money between businesses and households in an economy.

Gross Domestic Product

A measure of the economic performance of a country, representing the total value of all goods and services produced over a specific time period.

Social Welfare

A system that provides various forms of assistance to individuals and families in need, including healthcare, education, and financial aid.