If perfectly competitive firms are earning positive economic profits in the short run, then in the long run other firms will enter the market.

Question

Quizplus · Accepted Answer

In the long run, other firms will enter the market to compete, driving down prices and reducing profit margins for existing firms. This process will continue until economic profits are zero, at which point the industry will be in a long-run equilibrium.

If Perfectly Competitive Firms Are Earning Positive Economic Profits in the Short