Assume the market for beef is perfectly competitive. Beef producers are currently earning a zero economic profit. If consumers switch from chicken to beef, which of the following is most likely to occur?
A) Beef producers will now incur economic profits in both the short run and the long run.
B) Beef producers will incur economic profits in the short run. Some producers will enter the industry until all firms in the industry are earning a zero economic profit.
C) Beef producers will incur economic profits in the short run. Some producers will enter the industry as long as all firms in the industry are earning an economic profit.
D) Beef producers will now earn economic losses in the short run, and there will be no additional adjustments in the long run.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, an increase in demand (such as a switch from chicken to beef) leads to higher prices and economic profits in the short run. Over time, new producers enter the market, increasing supply until the economic profit is eliminated, and firms again earn a zero economic profit in the long run.

Assume the Market for Beef Is Perfectly Competitive