How can lack of investment in social capital affect private firms' profits?
What will be an ideal response?
Most social capital is in the form of roads, transit systems, fire services, police services, water, and sewer systems. All businesses use some combination of these services to conduct their business. For example, when transportation systems are inadequate, labor may be prevented from producing goods and services, or goods and services may be prevented from being sold. Either scenario will reduce a firm's overall profits by reducing quantity sold and therefore total revenue.
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Competitive firms earn zero profit in the long run when
A) entry is completely free. B) entry is limited. C) Both A and B. D) Neither A nor B.
Monetarists believe:
a. the cause-and-effect relationship hypothesized by the Keynesians understates the impact of stimulative monetary policy. b. the cause-and-effect relationship hypothesized by the Keynesians is an accurate description of how monetary policy works. c. since the economy is operating at full employment, any stimulative monetary policy will cause the inflation rate to rise. d. the cause-and-effect relationship hypothesized by the Keynesians is backwards, and decreases in the money supply actually stimulate economic activity. e. the cause-and-effect relationship hypothesized by Keynesians will not work because investment does not respond to changes in interest rates.