If a purely competitive constant-cost industry is realizing economic profits, we can expect industry supply to
A)increase, output to increase, price to decrease, and profits to decrease.
B)increase, output to increase, price to increase, and profits to decrease.
C)decrease, output to decrease, price to increase, and profits to increase.
D)increase, output to decrease, price to decrease, and profits to decrease.

Question

Quizplus · Accepted Answer

In a purely competitive constant-cost industry, economic profits attract new firms, increasing supply, which raises output, decreases price, and reduces profits.

If a Purely Competitive Constant-Cost Industry Is Realizing Economic Profits