Which of the following is true for a perfectly competitive agricultural market with economic profits?
A)Firms will enter and existing firms will increase their production until economic profits are zero.
B)The profits will last indefinitely since there are barriers to entry.
C)Firms will exit until normal profits are zero.
D)No entry or exit will occur based on economic profits.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, if firms are making economic profits, new firms will enter the market and existing firms will increase production to take advantage of the high profits. This increased supply will drive prices down until economic profits are zero, restoring equilibrium.

Which of the Following Is True for a Perfectly Competitive