When free entry exists, the perfect competitive model suggests that economic profit will always be equal to zero.
True or False?
Answer:
Sort of. In the short run, there may be supernormal profits--that is, economic profit > 0, but a sector marked by free entry means that more firms will come in, seeking some of that profit. these supernormal profits will no longer exist because of competition dissipating it, so in the long-run economic profit is equal to 0.
true, they will keep entering as long as profits are positive, and will only stop when profits hit zero.
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