-The corn market is perfectly competitive, with thousands of corn farmers. In the 2000s, the price of corn soared so that new farmers entered the corn market. Initially, entry ________ the economic profit of the initial corn farmers and in the long run the initial corn farmers ________.

Question

Quizplus · Accepted Answer

Initially, the entry of new farmers would increase supply, leading to a decrease in the price of corn. This decrease in price would lower the economic profit of the initial corn farmers. In the long run, as the market adjusts and more farmers enter, the economic profit would be driven down to zero due to the perfectly competitive nature of the market, where firms earn zero economic profit in the long run.

-The Corn Market Is Perfectly Competitive, with Thousands of Corn