1. Entrepreneurs in purely competitive industries: a. have no incentive to innov
ID: 1254565 • Letter: 1
Question
1. Entrepreneurs in purely competitive industries:a. have no incentive to innovate because in the long run they will earn no economic profits.
b. have no incentive to innovate because in the long run they will earn no economic profits.
c. utilize pricing strategies to generate short-run economic profits.
d. rarely try to innovate because of a lack of financial resources.
2. If a purely competitive constant-cost industry is realizing economic profits, we can expect industry supply to:
a. increase, output to increase, price to decrease, and profits to decrease.
b. increase, output to increase, price to increase, and profits to decrease.
c. decrease, output to decrease, price to increase, and profits to increase.
d. increase, output to decrease, price to decrease, and profits to decrease.
3. In a decreasing-cost industry:
a. there will be no firm entry because the increased supply will reduce the long-run equilibrium price.
b. the law of demand does not apply.
c. greater demand leads to higher long-run equilibrium prices.
d. lower demand leads to higher long-run equilibrium prices.
Explanation / Answer
Entrepreneurs in purely competitive industries:
Option B is correct,
Where the entrepreneur will innovate to lower the costs. In the above solution option B was wrongly typed actual option is;
Innovate to lower operating profits and generate economic profits.
If a purely competitive constant-cost industry is realizing economic profits, we can expect industry supply to:
Due to economic profits more firm will enter leading to an increase in supply, output and profits gets decreased due to a decline in prices.
Therefore, the correct answer is option B.
3. In a decreasing-cost industry:
option A is correct; this is because a decreasing cost industry leads to an increase in demand , reduction in price .
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