Price cutting in a competitive market will usually not lead to the creation of economic rents.

Question

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Economic rents refer to excess profits earned above the normal profits in a particular industry or market. In a competitive market, price cutting by one firm will lead to a reduction in profits for that firm, but will also put pressure on other firms in the market to cut prices, resulting in a reduction in overall profits and hence, no economic rents.

Price Cutting in a Competitive Market Will Usually Not Lead