The normal rate of profit for relatively risk-free firms will be _________ the interest rate on risk-free government bonds?
Correct answer: D. approximately equal to
- A. approximately one-half
- B. smaller than
- C. larger than
- D. approximately equal to
Explanation
For a relatively risk-free business, the normal return should be close to the return on an equally safe government bond. A much higher business return would represent compensation for greater risk or an economic profit.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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