Explain why economic profits in all perfectly competitive markets will tend toward zero in the long run.
What will be an ideal response?
In markets experiencing economic profits, firms will enter, forcing prices and profits down. Profits will be forced down to the zero level because as long as economic profits exist, firms will enter this market. In markets experiencing economic losses, firms will leave, pushing prices up and losses down. Profits will reach zero level because as long as economic losses exist, firms will leave this market.
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A positive relationship exists between monetary growth and interest rates when the
A) aggregate supply curve is horizontal. B) aggregate demand curve is horizontal. C) price level is fixed. D) income effect offsets the liquidity effect.
A government is running a budget deficit if:
A. government revenue exceeds government spending. B. imports exceed exports. C. exports exceed imports. D. government revenue is less than government spending.