Although an improvement in technology enables perfectly competitive firms to earn a positive economic profit in the short run,entry by new firms will ensure that those profits are eliminated over time.

Question

Quizplus · Accepted Answer

This statement is in line with the theory of perfect competition, which suggests that in the long run, new firms will enter the market and compete away any economic profits that existing firms may have been making in the short run. This process continues until only normal profits are being earned by all firms in the market. Therefore, the statement is true.

Although an Improvement in Technology Enables Perfectly Competitive Firms to Earn