The entry of new firms into the market stops when:
A)accounting profit falls to zero.
B)the general price level in the economy rises.
C)the rate of interest declines.
D)economic profit falls to zero.
E)the corporate taxes are relaxed.

Question

Quizplus · Accepted Answer

Economic profit falling to zero is the true indication that new firms will stop entering the market since they will no longer be able to earn higher profits than other industries. Accounting profit falling to zero does not necessarily deter entry, as firms may still be content with breaking even or even incurring losses in the short term. The other options, such as a rise in the general price level or a decline in the interest rate, do not necessarily have a direct impact on entry into a specific market.

The Entry of New Firms into the Market Stops When