Which of the following best illustrates how resources move from low-value industries to high-value industries in competitive markets?
A) Entrepreneurs will always find the market in which price is the highest and increase production in it.
B) The invisible hand will always equate prices in the long run.
C) Entrepreneurs will move production from low-profit industries to high-profit industries.
D) Firms will always be able to recognize high- and low- value industries simply by looking at their costs of production.

Question

Quizplus · Accepted Answer

In competitive markets, entrepreneurs seek to maximize profits, which means they will tend to move production from low-profit industries to high-profit industries. As a result, resources will shift from lower-value to higher-value industries over time, driven by market forces. This process is facilitated by the price mechanism, which helps signal where resources are needed most and adjusts prices accordingly. The other options either don't fully capture the role of entrepreneurs in driving resource movement or overstate the efficiency of market equilibration.

Which of the Following Best Illustrates How Resources Move from Low-Value