question 9 of 11\nnational income: how it is earned — questions for review\nwhat does constant returns to…

question 9 of 11\nnational income: how it is earned — questions for review\nwhat does constant returns to scale imply about the distribution of income?\nthat labor will be paid according to its marginal product, while capital will not\nthat long - term economic profits will be positive\nthat economic profits will be zero\nthat owners of firms will benefit disproportionately compared with workers

question 9 of 11\nnational income: how it is earned — questions for review\nwhat does constant returns to scale imply about the distribution of income?\nthat labor will be paid according to its marginal product, while capital will not\nthat long - term economic profits will be positive\nthat economic profits will be zero\nthat owners of firms will benefit disproportionately compared with workers

Answer

Brief Explanations:

In a production - function with constant returns to scale, in a competitive market equilibrium, economic profits are zero. This is because if firms were making positive economic profits, new firms would enter the market, increasing supply and driving down prices until profits are eliminated. If firms were making negative economic profits, some would exit the market, reducing supply and increasing prices until losses are eliminated. Labor and capital are paid according to their marginal products in a competitive market with constant returns to scale, and there is no reason for long - term positive economic profits or for firm owners to benefit disproportionately.

Answer:

that economic profits will be zero