Which of the Following Statements Is Correct

question 107

Multiple Choice

Which of the following statements is correct?

• A) Economic profits induce firms to enter an industry; losses encourage firms to leave.
• B) Economic profits induce firms to leave an industry; profits encourage firms to leave.
• C) Economic profits and losses have no significant impact on the growth or decline of an industry.
• D) Normal profits will cause an industry to expand.

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Definitions:

Output Increases

A rise in the quantity of goods or services produced by an economy or firm over a specific period.

Potential Output

The highest level of GDP a country can achieve when its resources are fully employed, without causing inflation.

Labor Productivity

A measure of economic performance that compares the amount of goods and services produced (output) with the number of labor hours used to produce those goods and services.

Supply of Labor

Refers to the total hours that workers wish to work at a given wage rate, influenced by demographics, wages, and working conditions.