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A firm in a purely competitive industry has a typical cost structure. The normal rate of...

A firm in a purely competitive industry has a typical cost structure. The normal rate of return in the economy is 12 percent. The firm is earning $25 on every $150 invested by it’s founders.

a. What is the percentage rate of return?

b. Is the firm earning an economic profit?

If so, how large? _____________percent

c. Will this industry see exit or entry?

d. What will be the rate of return earned by firms in this industry once the industry reaches long-run equilibrium?

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