Richard A. Miller () (Department of Economics, Wesleyan University)
Abstract
“[U]nder competition, the rate of return on investment tends toward equality in all industries.” Introductory and intermediate microeconomics textbooks are sketchy in explaining how capital is allocated by financial markets. Capital budgeting techniques, primarily net present value, deserve a more prominent role. This article suggests ways in which financial economics can be integrated into undergraduate courses to illuminate entry into (and exit from) industries in response to profit opportunities, as an essential part of economists’ narration of resource allocation in a capitalistic, market economy.
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Publisher Info
Paper provided by Wesleyan University, Department of Economics in its series Wesleyan Economics Working Papers with number
2006-016.
Find related papers by JEL classification: A20 - General Economics and Teaching - - Economics Education and Teaching of Economics - - - General D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy