Refer to the information provided in Figure 12.4 below to answer the question(s) that follow. Figure 12.4
There are two sectors in the economy, X and Y, and both are in long-run, zero-profit equilibrium at the intersections of S 0 and D 0.
-Refer to Figure 12.4. Assume consumer preference changes toward X and away from Y. Ceteris paribus, the likely change in capital flow in sector X will eventually
A) eliminate all profits.
B) eliminate all losses.
C) generate excess profits.
D) result in excess losses.

Question

Refer to the information provided in Figure 12.4 below to answer the question(s) that follow.  Figure 12.4
There are two sectors in the economy, X and Y, and both are in long-run, zero-profit equilibrium at the intersections of S 0 and D 0. 
-Refer to Figure 12.4. Assume consumer preference changes toward X and away from Y. Ceteris paribus, the likely change in capital flow in sector X will eventually
A) eliminate all profits. 
B) eliminate all losses. 
C) generate excess profits. 
D) result in excess losses.

Quizplus · Accepted Answer

As consumer preference shifts towards X, demand for X increases, leading to higher prices and profits. Over time, capital flows into sector X, increasing supply and competition, which eventually eliminates excess profits.

Refer to the Information Provided in Figure 12