The monopolistically competitive firm's economic profits tend toward zero in the long run. Why is this so?
A) Monopolistically competitive firm's are rarely able to maintain the corporate discipline necessary to sustain profits in the long run.
B) If a monopolistically competitive firm is profitable for more than 2 years, the Justice Department orders a corporate restructuring to pull the company back to a normal rate of return.
C) In the long run, other firms will successfully offer substitutes for the profitable firm's product, and competition will eliminate economic profits.
D) Even though the monopolistically competitive firm can successfully maintain barriers to entry, keeping competition at bay becomes very expensive.
C
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Between 1970 and 2010, the poverty rate in East Asia declined dramatically from about 60 percent to less than 1 percent, while the poverty rate in Sub-Saharan Africa decreased from 40 percent to only 24 percent. The main reason for this is that
A) The countries of East Asia have progressive income tax systems. The countries of Sub-Saharan Africa all have regressive income tax systems. B) Governments in East Asia increased transfer payments to poor families over this period of time. The governments of Sub-Saharan Africa had practically no transfer payment programs from 1970 to 2010. C) the population growth rate decreased in East Asia and increased in Sub-Saharan Africa. D) East Asia experienced higher economic growth than Sub-Saharan Africa.
When institutions and policies provide secure property rights, a fair and balanced judicial system, monetary stability, and effective limits on the power of government, which of the following is most likely to be encouraged?
a. rent-seeking b. actions that reduce the value of resources c. productive activities d. destructive activities