If there are below-normal short run profits in an industry, there will be:
A) entry.
B) exit.
C) no entry or exit.
D) below-normal profits in the next period.

Question

Quizplus · Accepted Answer

If there are below-normal short run profits in an industry, firms will be likely to exit the industry as they are not earning enough revenue to cover their costs. This will reduce the number of firms in the market and alleviate some of the downward pressure on prices. As a result, the remaining firms may experience higher profits in the long run.

If There Are Below-Normal Short Run Profits in an Industry