In a competitive system, profits from innovation represent a transitory income that will later tend to be competed away.

Question

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In a competitive market, if a firm earns excess profits from its innovative product, it will attract other firms to enter the market with similar products, which will eventually lead to competition and lower profits. Hence, profits from innovation are transitory in a competitive market, and they tend to be competed away over time.

In a Competitive System, Profits from Innovation Represent a Transitory