Which of the following statements is correct?
A)Economic profits induce firms to enter an industry; losses encourage firms to leave.
B)Economic profits induce firms to leave an industry; profits encourage firms to leave.
C)Economic profits and losses have no significant impact on the growth or decline of an industry.
D)Normal profits will cause an industry to expand.

Question

Quizplus · Accepted Answer

Economic profits signal to firms that there are opportunities for profit in an industry, encouraging new firms to enter. Conversely, losses indicate that the industry is not generating sufficient returns, prompting firms to exit. This dynamic helps balance supply and demand in the market.

Which of the Following Statements Is Correct