If existing fast-food firms realize sizable economic profits in the short run, which of the following will take place in the long run?

Question

Quizplus · Accepted Answer

In the long run, the entry of new firms into the market, attracted by the economic profits, will increase competition. This leads to a decrease in the demand for existing firms as consumers have more options, and their demand curves become more elastic because consumers can more easily switch to other firms' products.

If Existing Fast-Food Firms Realize Sizable Economic Profits in the Short