Which of the following statements is true?
A) In a competitive market, the invisible hand encourages the movement of resources from more productive uses to less productive uses.
B) In a competitive market, firms in the long run tend to earn positive economic profits.
C) Competitive equilibrium provides incentives for entrepreneurs to shift their resources from unprofitable industries to profitable ones.
D) At the competitive equilibrium, production occurs at the point of maximum average total cost.

Question

Quizplus · Accepted Answer

Competitive equilibrium provides entrepreneurs with incentives to shift their resources from unprofitable industries to profitable ones, as resources flow towards areas with higher profits. The invisible hand in a competitive market encourages the movement of resources towards more productive uses, not less productive ones. Firms in the long run tend to earn zero economic profits in a competitive market, not positive economic profits. Production occurs at the point of minimum average total cost at the competitive equilibrium, not maximum.

Which of the Following Statements Is True