Asked by James O'Connor on Jun 11, 2024
Verified
If firms are making positive economic profits in the short run,then in the long run:
A) the short-run industry supply curve will shift leftward.
B) new firms will enter the industry.
C) industry output will rise and the price will rise.
D) firms will leave the industry.
Economic Profits
Profits calculated by subtracting both explicit and implicit costs from total revenues, often representing the additional benefit over the next best alternative.
Industry Output
The total production or supply of goods and services produced within a specified industry over a given period of time.
- Articulate the role played by the entry and exit of firms in reaching long-run equilibrium in markets characterized by perfect competition.
Verified Answer
EV
Elizabeth ValadezJun 11, 2024
Final Answer :
B
Explanation :
When firms in an industry are making positive economic profits, it attracts new firms into the industry because they are attracted by the opportunity to earn profits. This entry of new firms increases the industry's output and typically leads to a decrease in prices until economic profits are normalized (i.e., reduced to zero).
Learning Objectives
- Articulate the role played by the entry and exit of firms in reaching long-run equilibrium in markets characterized by perfect competition.
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