In the absence of barriers to entry, what eventually happens to economic profits in an industry?
1 Answer
Nov 5, 2015
Economic Profit will disappear.
Explanation:
In a perfectly competitive market, there is no barriers to entry. In case the firms enjoy economic profit, in the long run more firms will enter the industry and the economic profit will be competed away. All the firms will earn only normal profit.
In the Monopolistic competition also, there is nor restrictions for the new firms to enter. When the industry is in equilibrium, in the long run, all the firms will earn only normal profit.
