Which of the following is an investment decision in a competitive market? Entry or exit. The...
Which of the following is an investment decision in a competitive market?
Entry or exit.
The shutdown decision.
The rate of output to produce.
The price to charge.
Homework Answers
Answer
Option 1
entry or exit
If firms in the market are earning an economic profit, then the investors decide to enter the market and if the firm is making a loss in the long run then exit the market to minimize losses on the investments.
The rate of output and shutdown are operative decisions of the firms. The firms are a price taker, and they can not decide on a price.
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