The motivating force behind an increase in supply in a long-run adjustment to equilibrium is
A) lower prices.
B) economic profits that are present in the short run.
C) higher profit expectations among owners of firms in the industry, triggered by increased prices.
D) normal profits witnessed by individuals outside the industry that trigger entry.
E) the decreases in average cost that can be obtained through economies of scale.

Question

Quizplus · Accepted Answer

Economic profits present in the short run attract new firms to enter the market, increasing supply until profits are normalized in the long run.

The Motivating Force Behind an Increase in Supply in a Long-Run