In August 2008, Ethan Nicholas developed the iShoot app for the Apple iPhone 3G, and within five months had earned $800,000 from this program.By May 2009, Nicholas had dropped the price from $4.99 to $1.99 in an attempt to maintain sales.This example indicates that in a competitive market,
A)earning an economic profit in the long run is extremely easy.
B)earning an economic profit in the long run is extremely difficult.
C)it is impossible to earn an economic profit in either the short run or the long run.
D)economic profits are only earned in the long run.

Question

Quizplus · Accepted Answer

The fact that Nicholas had to drop the price of his app in just five months to maintain sales shows that the market was competitive and other developers were offering similar apps at lower prices. This suggests that earning an economic profit in the long run is extremely difficult in this market.

In August 2008, Ethan Nicholas Developed the IShoot App for the Apple