Over time, the only way firms can continue to earn positive economic profits is
A) with government control over price.
B) hire top entrepreneurs.
C) if other firms cannot copy the unique aspects of the firm's product or service.
D) by reducing diseconomies of scale.
E) through increased competition.

Question

Quizplus · Accepted Answer

Economic profits occur when a firm's revenues exceed its total costs, including both explicit and implicit costs. To continue earning positive economic profits over time, the firm must have a unique competitive advantage that cannot be easily replicated by other firms in the industry. This can be achieved through factors like patents, trademarks, economies of scale, or strong brand recognition. However, if other firms are able to copy the unique aspects of the firm's product or service, the economic profits will eventually erode and the firm will be forced to compete on a more equal footing, leading to normal or even negative profits.

Over Time, the Only Way Firms Can Continue to Earn