Positive economic profits in a perfectly competitive market imply that ________.

Question

Quizplus · Accepted Answer

Positive economic profits in a perfectly competitive market means that the price is higher than the average total cost, which implies that producers are earning more than their opportunity cost. This increases the incentive for other firms to enter the market, leading to increased competition and potentially driving prices down to the level of average total cost in the long run. Therefore, it is not likely that existing firms will leave the market, government intervention is not required, and cost of production being equalized across producers is a characteristic of perfect competition rather than a consequence of economic profits.

Positive Economic Profits in a Perfectly Competitive Market Imply That