When there are no profits in an industry, firms will not undertake any investment projects.

Question

Quizplus · Accepted Answer

While lack of profits may discourage firms from undertaking investment projects, there may still be other factors such as long-term growth prospects or government incentives that encourage investment even in a loss-making industry. Additionally, firms may still need to invest in order to remain competitive or to maintain assets.

When There Are No Profits in an Industry, Firms Will