We can predict that resources will move into an industry whenever
A)accounting profits for firms in that industry are greater than zero.
B)accounting profits for firms in that industry are zero.
C)economic profits for firms in that industry are zero.
D)economic profits for firms in that industry are greater than zero.
E)economic losses for firms in that industry are minimized.

Question

Quizplus · Accepted Answer

Economic profits take into account both explicit (accounting) costs and implicit costs (such as opportunity costs). Therefore, firms are more likely to enter an industry when economic profits are positive, indicating that there is an opportunity to make a profit above and beyond what is required to cover all costs, including opportunity costs. Accounting profits alone do not take into account opportunity costs and may not provide an accurate picture of the profitability of an industry.

We Can Predict That Resources Will Move into an Industry