Investment, the Capital Market, and the Wealth of Nations (Mobile-Enabled) Grade

Question

Investment, the Capital Market, and the Wealth of Nations (Mobile-Enabled) Graded Assignment Due Sunday 12.03.17 at 11.00 P Do No Harm: 12 Attempts: 9. Economic profit and the capital market True or False: Firms and individual investors can earn persistent economic profits only in markets with barriers to entry. O True O False In a centrally planned economy, investment funds are allocated by the have . incentives to evaluate risks and act prudently. . Under such an economic system, investors will Grade It Now & Continue Copyright Notices Terms of Use Privacy Notice Security Notice Accessibility

Explanation / Answer

Answer - Firms and individual investors can earn persistent economic profit only in the market with barriers to entry. This is a true statement. Firms can earn supernormal profit in such market where there is not fear of new entrant.

Answer - In a centrally planned economy all investment funds are allocated by the government. Under such economic system investor do not have any incentives to evaluate risk and act prudently. All decision regarding production, investment, resource allocation, prices, savings, etc, are taken by the government.  

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