Question 13 (1 point)

Suppose that all of the firms in an industry are incorporated and consistently earn a 2% return on stockholder's equity, but alternative investments (e.g. certificates of deposit) earn 4%. In this industry, the firms are earning ___________ economic profits, and we expect to see the industry ___________ in the long run.

	A. positive; expand.
	B. negative; expand.
	C. positive; shrink.
	D. negative; shrink.

Question 14

If a firm earns normal profits, then its economic profits:

	A. Are zero.
	B. Are normal also.
	C. Equal its accounting profits.
	D. Increase when income rises.
	D. Are high enough to attract entry.

Question 15 (1 point)

When a corporation evaluates an investment project, it typically ignores the payment streams that are more than 30 years (or some similar threshold) in the future. This is mainly:

	A. To simplify the calculations.
	B. Because those payments are so heavily discounted that they have little effect on the decision.
	C. Because the uncertainty surrounding those payments is so great that they cannot be meaningfully estimated.