3. There are 300 farms in the perfectly competitive local dairy market. Of the 300 dairy farms, 298 have a cost structure that generates profits of $24 for every $300 invested. What is their percentage rate of return? The other two dairies have a cost structure that generates profits of $22 for every $200 invested. What is their percentage rate of return? Assuming that the normal rate of profit in the economy is 10 percent, will there be entry or exit? Will the change in the number of farms affect the two farms that earn $22 for every $200 invested?

What will be the rate of return earned by most farms in the industry in long-run equilibrium? If farms can copy each other’s technology, what will be the rate of return eventually earned by all farms? [LO10.43]