Question: Why in the long run, the purely competitive firm in a constant cost industry achieves...
Question: Why in the long run, the purely competitive firm in a constant cost industry achieves only normal profits? Select one:
a. New firms entering the industry increase supply, reduce price and squeeze out the the economic profit.
b. In the long run, normal profit is not the only situation that can face a purely competitive firm
. c. New firms entering the industry do not affect supply since they divide up the existinng market, but costs to the firm increase and this squeezes out the economic profit
. d. Economic profits do not exist in the long run, since they cannot exist in the short run because of competition.
Homework Answers
Ans: a. New firms entering the industry increase supply, reduce price and squeeze out the the economic profit.
Explanation:
In the long run, the purely competitive firm in a constant cost industry achieves only normal profits because new firms enter in to the industry which leads increase in supply , reduction in price and squeeze out the the economic profit.
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