Asked by
Xavier Bonner
on Oct 14, 2024Verified
If there are constant returns to scale in an industry, then in competitive equilibrium, profits in that industry must necessarily be zero.
Constant Returns to Scale
A situation in production where increasing all inputs by a certain factor results in output increasing by the same factor.
Competitive Equilibrium
A market state where supply equals demand, resulting in an efficient distribution of goods and services without excess.
- Understand the principles of competitive equilibrium and Pareto optimality.
Verified Answer
IO
Learning Objectives
- Understand the principles of competitive equilibrium and Pareto optimality.