Which of the following statements is TRUE?
A) Even entrepreneurs cannot earn above-normal profits in a competitive marketplace.
B) In a competitive market, above-normal profits will be eliminated by entry of new firms.
C) In a competitive market, below-normal profits are common.
D) The most profitable firms will always have the lowest opportunity costs.

Question

Quizplus · Accepted Answer

In a competitive market, there are no barriers to entry, which means new firms can enter the market easily. This increased competition will drive down prices and eliminate above-normal profits. However, firms may still earn below-normal profits in a competitive market if they are not able to differentiate themselves effectively or keep their costs low. The profitability of a firm is not solely dependent on its opportunity costs.

Which of the Following Statements Is TRUE