6) The real profit rate and the long run equilibrium number of firms (from lecture and ppt slides) Suppose firms currently in business have alternative "outside option" investments (e.g. a business in another country, or earning interest on government bonds) that would earn the owners of a real profit rate of PR if they were to shut down their current business. a) Under what condition concerning the real profit rate will a firm remain in business? Under what condition concerning the real profit rate will a firm go out of business? b) Under what condition concerning the real profit rate will the number of firms in the economy increase? c) Given your answers to a) and b) complete the following sentences: IF PR> PR* and entry of new firms is possible, THEN IF PR < PR* THEN IF PR-PR THEN
6) The real profit rate and the long run equilibrium number of firms (from lecture and ppt slides) Suppose firms currently in business have alternative "outside option" investments (e.g. a business in another country, or earning interest on government bonds) that would earn the owners of a real profit rate of PR if they were to shut down their current business. a) Under what condition concerning the real profit rate will a firm remain in business? Under what condition concerning the real profit rate will a firm go out of business? b) Under what condition concerning the real profit rate will the number of firms in the economy increase? c) Given your answers to a) and b) complete the following sentences: IF PR> PR* and entry of new firms is possible, THEN IF PR < PR* THEN IF PR-PR THEN
Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter14: Firms In Competitive Markets
Section: Chapter Questions
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