Suppose That a Normal Rate of Return in the Economy

question 12

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.

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Definitions:

File Clerk

A file clerk is an administrative professional responsible for managing and organizing documents and records in an office setting.

Rapid-Fire Decisions

Quick decision-making processes, often made with little deliberation.

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A personality pattern characterized by high levels of competitiveness, self-imposed stress, impatience, and aggression.

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A negative attitude towards others, characterized by mistrust, cynicism, and a belief that others are motivated by selfishness.