The primary force encouraging the entry of new firms into a purely competitive industry is
A) normal profits earned by firms already in the industry.
B) economic profits earned by firms already in the industry.
C) government subsidies for start-up firms.
D) a desire to provide goods for the betterment of society.

Question

Quizplus · Accepted Answer

Economic profits earned by firms already in the industry serve as an incentive for new firms to enter the industry in the hopes of earning similar profits. In a purely competitive industry, firms earn only normal profits in the long run, so the potential to earn economic profits in the short run encourages new entry. Government subsidies or a desire to provide goods for society may be contributing factors, but they are not the primary force encouraging new entry in a purely competitive industry.

The Primary Force Encouraging the Entry of New Firms into a Purely