If firms are protected by substantial barriers to entry, short-run profits can turn into long-run profits.

Question

Quizplus · Accepted Answer

If there are substantial barriers to entry, new firms will find it difficult to enter the market to compete with existing firms. This means that the existing firms can continue making profits in the long run, as they face limited competition. Thus, short-run profits can turn into long-run profits if entry barriers are high.

If Firms Are Protected by Substantial Barriers to Entry, Short-Run