New firms have incentive to enter an industry when there is
A)new production technologies.
B)positive economic profits.
C)an abundance of labor.
D)high capital costs.

Question

Quizplus · Accepted Answer

Positive economic profits are a major incentive for new firms to enter an industry as it signals the potential for them to make profits themselves. This is in contrast to industries with negative economic profits, where firms may exit the industry due to losses. New production technologies, an abundance of labor, and high capital costs may also play a role in determining entry, but they are not as strong of an incentive as positive economic profits.

New Firms Have Incentive to Enter an Industry When There