When positive economic profits exist in an industry,________.

Question

Quizplus · Accepted Answer

Positive economic profits indicate that the industry is producing goods at a price higher than its average total cost, making it more profitable than other industries. As a result, resources will flow towards this industry from less productive uses, seeking higher profits. Option A is incorrect because the market price is higher than the average total cost in this case. Option C is incorrect because if there are positive economic profits firms will want to enter the industry, not exit it. Option D is incorrect because the market price is higher than the marginal cost in this situation.

When Positive Economic Profits Exist in an Industry,________