In the long run when a perfectly competitive firm experiences positive economic profits

Question

Quizplus · Accepted Answer

In the long run, positive economic profits in a perfectly competitive market indicate that firms are earning more than the normal rate of return on their investment. As a result, new firms are likely to enter the market attracted by these profits, increasing the market supply and shifting the market supply curve rightward. This shift causes the market price to fall, bringing down the profits of all firms until they earn only a normal rate of return. Hence, option B is correct. The other options are false because they indicate that the market supply curve will shift leftward, which is not consistent with the presence of economic profits.

In the Long Run When a Perfectly Competitive Firm Experiences