When firms in a competitive market have different costs, it is likely that
A)free entry and exit in the market will be violated.
B)the market will no longer be considered competitive.
C)long-run market supply will be downward sloping.
D)some firms will earn positive economic profits in the long run.

Question

Quizplus · Accepted Answer

In a competitive market, firms will continue to enter until economic profits are zero. However, if firms have different costs, some firms will be able to produce at a lower cost than others and achieve positive economic profits. These profits will attract more firms to enter the market, increasing supply and driving down prices until profits are again reduced to zero. In the long run, some firms will still earn positive economic profits, but the industry as a whole will still be considered competitive.

When Firms in a Competitive Market Have Different Costs, It