Economics 19th Edition by Stanley Brue, Cambell McConnell, Campbell McConnell, Sean Masaki Flynn, Sean Flynn

Exercise 1

A firm in a purely competitive industry has a typical cost structure. The normal rate of profit in the economy is 5 percent. This firm is earning $5.50 on every $50 invested by its founders. What is its percentage rate of return Is the firm earning an economic profit If so, how large Will this industry see entry or exit What will be the rate of return earned by firms in this industry once the industry reachesequilibrium