If the opportunity cost of capital is below the rate of return to capital in the perfectly competitive beauty salon industry,

Question

Quizplus · Accepted Answer

If the opportunity cost of capital is below the rate of return to capital in the perfectly competitive beauty salon industry, this means that there are higher returns available in this industry compared to other industries. As a result, resources will flow into the industry as entrepreneurs and investors seek to take advantage of the higher returns. This will result in an increase in the supply of beauty salon services, which could ultimately lead to a decrease in the rate of return to capital in the industry. However, in the short run, increased competition may lead to higher levels of economic profit for some beauty salon owners.

If the Opportunity Cost of Capital Is Below the Rate