In the long run, a perfectly competitive firm makes zero economic profit. What incentive does the firm have to stay in business if it is making zero economic profit?
What will be an ideal response?
Zero economic profits do not mean no profit whatsoever. The owners of the firm are still making a normal profit. A normal profit compensates the firm's owners enough to keep the firm in business because it is equal to the owner's opportunity cost. Hence the firm has the incentive to stay in business.
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Which of the following is NOT a method by which unions try to increase the demand for the labor of their members?
A) increasing the marginal product of union members B) increasing the supply of the goods produced by union labor C) supporting minimum wage laws D) supporting immigration restrictions
It's not likely that a country will specialize completely in one good even if it has a lower opportunity cost because
A. Comparative advantage is not a workable concept in the world economy. B. Opportunity costs increase as more of a good is produced. C. The country would end up inside its production possibilities curve. D. The country would want to save some of the good for its own citizens.