When economic profits in a perfectly competitive industry are positive
A) Either more firms will enter or existing firms will expand output.
B) Either firm will exit or existing firms will cut back production.
C) Nothing will happen because firms cannot enter or exit the market without a government license.
D) Firms will continue to make a positive economic profit in the long run.
When economic profits in a perfectly competitive industry are positive
A) Either more firms will enter or existing firms will expand output.
B) Either firm will exit or existing firms will cut back production.
C) Nothing will happen because firms cannot enter or exit the market without a government license.
D) Firms will continue to make a positive economic profit in the long run.
Related textbook solutions
Related questions
Refer to the above figure. If the price is $6 in the short run, what will happen in the long run?
| a. |
Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry. |
| b. |
Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry. |
| c. |
Because the price is below the firm's average variable costs, the firms will shut down. |
| d. |
Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. |
