Short-run economic profits in a perfectly competitive industry encourage firms to _____ the industry,and short-run losses encourage firms to _____ the industry.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, short-run economic profits attract new firms to enter the industry, increasing supply and driving down prices and profits. Conversely, short-run losses lead existing firms to exit the industry, reducing supply, which can help prices and remaining firms' profitability to recover.

Short-Run Economic Profits in a Perfectly Competitive Industry Encourage Firms