Which of the following best illustrates the elimination principle?
A) Unproductive workers are fired and replaced by more productive workers.
B) A firm earning below-normal profits continues to operate in the hopes of earning higher profits in the future.
C) Above-normal profits are reduced as new firms enter the market.
D) High demand causes a shortage of goods in the market.

Question

Quizplus · Accepted Answer

The elimination principle is also known as the "invisible hand" of the market. It states that in a competitive market economy, excess profits will attract new firms, leading to increased competition and price reductions. This is illustrated in choice C, where above-normal profits are reduced as new firms enter the market.

Which of the Following Best Illustrates the Elimination Principle