When economic profits exist in a perfectly competitive market,the number of suppliers will increase and the market price will fall in the long run.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms will enter in the long run if there are economic profits. The increase in the number of suppliers will result in an increase in market supply, which will lead to a decrease in the market price and a reduction in economic profits. This process will continue until all firms earn only normal profits (i.e., accounting profits equal to opportunity costs). Therefore, the statement is true.

When Economic Profits Exist in a Perfectly Competitive Market,the Number