Assume that we are concerned about the existence of one firm (monopoly) in a market because of the potential for economic profits. If, however, there is free entry and exit, should our concerns change? Why or why not?
What will be an ideal response?
Yes. If a market is contestable the firm cannot use its monopolistic position because the profits will entice entry, which will force the firm to lower its price.
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According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study:
a. is positive. b. outweighs the extra cost. c. exceeds the benefits of the previous hour of study. d. will raise your exam score.
If a firm makes normal profit, the entrepreneur must earn a wage that
a. is at least as much as he can earn elsewhere b. must be less than he can earn elsewhere c. equals the economic profit generated by the firm d. lowers the opportunity cost of finding alternative work e. is enough for him to live on