In a perfectly competitive market with positive economic profits:

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms will enter the market as long as they can earn positive economic profits. This will increase the supply in the market, leading to a decrease in market price. As the market price decreases, the economic profits of each firm will decrease. Firms will continue to enter until economic profits are reduced to zero. Similarly, firms will exit the market if they are earning negative economic profits. Therefore, in a perfectly competitive market with positive economic profits, firms will enter until economic profits are zero.

In a Perfectly Competitive Market with Positive Economic Profits