The elimination principle suggests that:
A) entry eliminates above-normal profits and exit eliminates below-normal profits.
B) shortages are eliminated by price increases.
C) surpluses are eliminated by price decreases.
D) excess profits are hard to eliminate.

Question

Quizplus · Accepted Answer

The elimination principle in economics refers to the idea that in a competitive market, the entry of new firms will eliminate above-normal profits, while the exit of firms will eliminate below-normal profits, leading to a normal profit equilibrium.

The Elimination Principle Suggests That