When entry barriers into a market are low, firms will tend to earn zero economic profit in the long run because
A) low entry barriers lead to rising costs.
B) profit-seeking entrepreneurs will not enter a market when entry barriers are low.
C) short-run profit attracts additional suppliers and drives down the market price.
D) consumers will refuse to pay more than the cost of producing a good once they find out the producer's per-unit costs.

Question

Quizplus · Accepted Answer

When entry barriers are low, new firms can easily enter the market if they see existing firms making a profit. This increases supply, leading to a decrease in market prices until firms earn zero economic profit in the long run.

When Entry Barriers into a Market Are Low, Firms Will