Category: Economics

➤ Why do firms earn zero economic profit in the long run under perfect competition?
Free entry and exit let new firms join when incumbents earn profit, increasing supply and lowering price. If firms face losses, exits reduce supply and raise price. These adjustments continue until price equals average total cost, leaving firms with zero economic profit (normal profit) in long-run equilibrium.

How much money did the American government spend per day during WWII?

Tourism is a major component of the economy of San Antonio.TrueFalse

Which of these leads to habit formation?educationabilitylosspractice

➤ When can price and quantity demanded move in the same direction?
Direct price-quantity relationships occur only in special cases like Giffen and Veblen goods. For some inferior staples, a higher price can raise quantity demanded if the income effect outweighs substitution. For status goods, higher price may increase demand for prestige. These cases are rare and depend on specific conditions.

➤ Can I convert this inverse demand into a demand function Q(p)?
Yes. Rearrange p = 4 − 0.005Q to solve for Q. Multiply by 200 (1/0.005) to get Q = 800 − 200p. This gives the direct demand function. It returns quantity for any price in the feasible range p ∈ [0,4], corresponding to Q ∈ [0,800].