If economic proﬁts in a particular industry increase, then we would expect
A) resources to be diverted away from that industry.
B) ﬁrms in that industry to produce less output.
C) ﬁrms to enter that industry, thus expanding it.
D) consumers to buy less from that industry.

Question

Quizplus · Accepted Answer

Economic profits are an indication of high demand for goods or services in an industry with limited supply. Firms will want to enter this industry to take advantage of these high profits, thus expanding the industry. This will increase competition and eventually reduce profits, bringing them back down to the level of other industries.

If Economic Proﬁts in a Particular Industry Increase, Then We