Firms Earning Normal Profits In An Industry

Question

1. When firms in an industry are earning normal profits:

A) they are likely to be investigated for price gouging.
B) they are earning zero accounting profits.
C) the number of firms in the industry is stable.
D) their stocks are not valued by investors.

2. Sam, who owns 100 shares of IBM stock, hopes to raise the market price of the stock by buying another 100 shares. The primary reason his endeavor will fail is that:

A) He is such a small part of the overall market that his extra demand will have a negligible effect on the market price.
B) IBM is a monopoly and therefore controls the price of its stock.
C) the Securities and Exchange Commission will intervene if anyone tries to influence stock prices
D) the other stockholders will attempt to neutralize Sam's efforts.

Summary

These multiple choice questions belong to Economics. The 1st question discusses about firms earning normal profits in an industry and the 2nd question is about a person investing in IBM stock and then buys additional stock.

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