Suppose That Firms in a Competitive Industry Are Earning Positive

question 273

Multiple Choice

Suppose that firms in a competitive industry are earning positive economic profits. All else equal, in the long run, we would expect the number of firms in the industry to

• A)increase.
• B)decrease.
• C)remain the same.
• D)We do not have enough information with which to answer this question.

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Definitions:

Interest Rate

The fraction of a borrowed sum that incurs interest charges for the borrower, often expressed in terms of a yearly percentage.

Investment

The process of assigning financial resources with the goal of making a profit or gaining income.

Interest

The amount paid for the use of borrowed money, typically expressed as a percentage.

Invested

The allocation of resources, typically money, into ventures with the expectation of generating income or profit.