When would you expect economic profits in an industry to be zero?
a. When firms are entering the industry.
b. When firms are leaving the industry.
c. When existing firms are growing.
d. When firms have no incentives to enter or exit.
Question 2
Most textiles worn by American consumers are produced in Asian and South American countries where the opportunity costs of production are lower. This observation refers to the:
a. law of supply.
b. income elasticity of demand.
c. principle of beneficial tariffs.
d. principle of comparative advantage.
e. law of decreasing returns to scale.
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