Suppose the market for AR-15 style rifles in the United States was in an initial long-run equilibrium.In the fall of 2012,the demand for these rifles increased substantially due to concerns that President Obama would either ban or restrict the sale of these semi-automatic rifles.As a result,the market price of these rifles increased,and gun manufacturers earned positive economic profits (shown in the figure below).

The presence of economic profits in the short-run will lead to the ________.

Question

Suppose the market for AR-15 style rifles in the United States was in an initial long-run equilibrium.In the fall of 2012,the demand for these rifles increased substantially due to concerns that President Obama would either ban or restrict the sale of these semi-automatic rifles.As a result,the market price of these rifles increased,and gun manufacturers earned positive economic profits (shown in the figure below) .

The presence of economic profits in the short-run will lead to the ________.

Quizplus · Accepted Answer

The presence of economic profits in the short-run will attract new firms to enter the market, causing the market supply curve to shift out until the price falls to the minimum of the average total cost for the representative firm in the long-run equilibrium. This is because new firms will see the opportunity for profits and enter the market, increasing the supply of AR-15 style rifles, which will push down the market price. Eventually, the price will fall to the point where the economic profits will be competed away, and firms will earn zero economic profits in the long-run equilibrium.

Suppose the Market for AR-15 Style Rifles in the United