What happens in a perfectly competitive industry when economic profit is greater than zero?
A) Existing firms may get larger.
B) New firms may enter the industry.
C) Firms may move along their LRAC curves to new outputs.
D) There may be pressure on prices to fall.
E) All of the above may occur.

Question

Quizplus · Accepted Answer

In a perfectly competitive industry, when economic profits are greater than zero, it attracts new firms into the industry, existing firms might expand, firms adjust their outputs along their long-run average cost (LRAC) curves, and the increased competition and supply tend to push prices down, leading to all of the mentioned outcomes.

What Happens in a Perfectly Competitive Industry When Economic Profit