Which of the following is true for firms that produce in markets where there are no barriers to entry?
a. The firms will always make positive economic profits in the long run.
b. The firms will always make positive economic profits in the short run.
c. The firms will always make zero economic profits in the short run.
d. The firms will always make zero economic profits in the long run.
D
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Which of the following is heavily subsidized by state and local governments?
A) Medicare B) Social Security C) public education D) food stamps
Suppose there are only two people, Mr. Mullinax and Ms. Fleming, who must split a fixed income of $500. For Mr. Mullinax, the marginal utility of income is MU m = 600 - 2I m , while for Ms. Fleming, marginal utility is MU f = 600 - 3I f , where I m and I f are the amounts of income to Mr. Mullinax and Ms. Fleming, respectively.
(A) What is the optimal distribution of income if the social welfare function is additive? (B) What is the optimal distribution if society values only the utility of Ms. Fleming? What if the reverse is true? Comment on your answer. (C) Finally, comment on how your answers change if the marginal utility of income for both Mr. Mullinax and Ms. Fleming is constant such that Mu m = 250 = MU f . (This one is subtle.) The setup should be I m + I f = 500 and 600 - 3I f = 600 - 2I m