Generally,______ motivate firms to enter an industry,while ______ motivate firms to exit an industry.
A) economic profits;economic losses
B) accounting profits;accounting losses
C) accounting profits;economic losses
D) economic profits;accounting losses
E) normal profits;normal losses

Question

Quizplus · Accepted Answer

Economic profits (revenues minus all costs, including opportunity costs) motivate firms to enter an industry because they see an opportunity to make money. Economic losses (where costs exceed revenues) motivate firms to exit an industry because they are not making a profit and may be losing money. Accounting profits and losses only consider explicit costs and revenue, and do not account for implicit or opportunity costs, so they are not as accurate for determining whether a firm should enter or exit an industry. Normal profits and losses refer to when a firm is making exactly enough to cover all its costs, but neither motivate firms to enter or exit an industry.

Generally,______ Motivate Firms to Enter an Industry,while ______ Motivate Firms

Generally, Motivate Firms to Enter an Industry,while Motivate Firms