) For the situation depicted in Exhibit 104, what will happen in the longrun?
A)New technology will lower average total costs and increase profits for the firm.
B)Firms will exit this market causing economic profit to increase.
C)Product differentiation will lead to an increase in profitablility.
D)New firms will enter the market driving economic profit to zero.
E)Nothing, the situation will remain the same.

Question

)  For the situation depicted in Exhibit 10­4, what will happen in the long­run?
A)New technology will lower average total costs and increase profits for the firm. 
B)Firms will exit this market causing economic profit to increase. 
C)Product differentiation will lead to an increase in profitablility. 
D)New firms will enter the market driving economic profit to zero. 
E)Nothing, the situation will remain the same.

Quizplus · Accepted Answer

In the long-run, new firms will enter the market, attracted by the economic profit being made. As more firms enter, the supply of the product will increase leading to a decrease in price. This will continue until economic profit is driven to zero, at which point the remaining firms will earn only normal profits. Thus, option D is the correct answer.

) for the Situation Depicted in Exhibit 10­4, What

) for the Situation Depicted in Exhibit 104, What