When free entry is one of the attributes of a market structure,economic profits are:
A) generally driven to zero in long-run equilibrium.
B) generally negative for all firms.
C) generally zero in the short run.
D) always positive.

Question

Quizplus · Accepted Answer

Free entry means that new firms can easily enter the market, which increases competition and drives down prices. This decrease in prices causes economic profits to decrease, and in the long run, economic profits will be driven to zero due to firms entering the market until all firms earn zero economic profit.

When Free Entry Is One of the Attributes of a Market