Assume that there is free entry and exit in the management consulting market. How profitable can Mario expect his new consulting business to be in the long run?
A)It will experience continually rising economic profits.
B)It will suffer economic losses.
C)It will earn positive economic profits.
D)It will experience zero economic profits.

Question

Quizplus · Accepted Answer

With free entry and exit in the market, Mario can expect competition to enter and compete for clients, driving down prices and limiting his ability to earn economic profits in the long run. This means that he can expect to earn zero economic profits, but still cover his costs and make a normal rate of return on his investment.

Assume That There Is Free Entry and Exit in the Management