Which of the following statements is TRUE?
A) Entry and exit from an industry depend on the firm's market share.
B) Fixed costs fall as firms produce more output, the so-called "spreading of the costs."
C) High profits in an industry give entrepreneurs an incentive to enter that industry.
D) A firm should enter an industry if average costs are less than producer surplus.

Question

Quizplus · Accepted Answer

High profits in an industry signal to entrepreneurs that there is potential for profit, providing an incentive for them to enter that industry. This increased competition can eventually lead to lower profits as the market becomes more saturated. Entry and exit from an industry can be influenced by factors beyond a firm's market share. Fixed costs generally do not decrease with higher output, and the concept of producer surplus does not directly relate to a firm's decision to enter or exit an industry.

Which of the Following Statements Is TRUE