Question
A shock to the economy occurs because of a coronavirus pandemic.Before the shock firms the the travel industry were earning a normal return (zero economic
A shock to the economy occurs because of a coronavirus pandemic.Before the shock firms the the travel industry were earning a normal return (zero economic profits) and firms in the health care industry were also earning a normal return.After the shock, economic profits turn negative in the travel industry and turn positive in the health care industry.Given the shock to the economy
A, government can increase efficiency by giving a subsidy to firms both the travel industry and the health care industry.
B, economic efficiency can be enhanced by firms in both industries continuing to produce the same amounts with the same resources.
C the competitive process will work to reallocate resources from the travel industry to the health care industry.
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