In a perfectly competitive market, if a resource that one firm utilizes is superior to resources used by other firms, and, as a result, lowers unit costs for the firm, that firm is likely to earn __________ in the short run. In time, however, the firm's __________ curve will rise to reflect the superior-quality of the resource it employs and the firm will then earn __________.

Question

Quizplus · Accepted Answer

In the short run, the firm will be earning positive economic profit due to the lower unit costs resulting from the superior resource. However, over time, the market will adjust and the firm's cost curve will rise to reflect the higher quality resource, leading to normal profit in the long run. Therefore, choice B, which states that the firm will earn positive economic profit in the short run but only normal profit in the long run, is the best choice.

In a Perfectly Competitive Market, If a Resource That One