In the long run firms will expand as long as there are more ________, and new firms will enter the industry as long as they earn ________.
A) economies of scale; zero profits
B) economies of scale; positive economic profits
C) diseconomies of scale; zero profits
D) diseconomies of scale; positive economic profits

Question

Quizplus · Accepted Answer

In the long run, firms will expand to take advantage of economies of scale, which refers to the cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output decreasing with increasing scale. New firms will enter the industry as long as they can earn positive economic profits, which are profits exceeding the opportunity cost of capital.

In the Long Run Firms Will Expand as Long as There