Suppose That a Normal Rate of Return in the Economy

Multiple Choice

Suppose that a normal rate of return in the economy is 10% and the rate of return being earned by firms in a competitive industry equals exactly 10%. Which of the following is a CORRECT prediction based on this information?

A) New firms will want to enter this industry, as the existing firms are earning an economic profit.
B) Firms already in the industry will want to expand to try to increase their rate of return.
C) Firms in the industry will not undertake any investment projects other than to replace depreciating capital stock.
D) The industry size will contract.