When free entry is one of the attributes of a market structure, economic profits are:

Question

Quizplus · Accepted Answer

When free entry is present in a market structure, firms are able to easily enter and exit the market to compete for profits. As more firms enter the market, the supply of goods or services increases, causing prices to fall and reducing the economic profits for existing firms. This competition eventually drives economic profits to zero, as all firms earn only normal profits (the minimum level of profits necessary to keep a firm in business). Therefore, option A is the correct answer.

When Free Entry Is One of the Attributes of a Market