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A firm in a purely competitive industry has a typical cost structure. The normal rate of profit in the economy is 5 percent. This firm is earning $5.50 on every $50 invested by its founders. What is its percentage rate of return? Is the firm earning an economic profit? If so, how large? Will this industry see entry or exit? What will the rate return earned by firms in this industry once the industry reaches long-run equilibrium?

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Anne Gillian Duero
Anne Gillian DueroLv10
28 Sep 2019

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