If a firm operating in a fairly competitive market earns a large economic profit,then,over time,
A)old firms will exit and prices will rise.
B)old firms will exit and prices will fall.
C)new firms will enter and prices will rise.
D)new firms will enter and prices will fall.

Question

Quizplus · Accepted Answer

In a fairly competitive market, large economic profits attract new firms. As these new firms enter the market, the increased competition leads to a decrease in prices.

If a Firm Operating in a Fairly Competitive Market Earns