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if firms are making excess profits in the long run, describe what will happen

if firms are making excess profits in the long run, describe what will happen

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Answer #1

ANSWER-

In the long-run firms make nomarl profits under competitive market. If the firms make excess profits than the normal profits than new firms will enter the market as there is no restriction in entry or exit of a firm uder competitve market. The new firms will keep entering the market thil the firms earn normal profits.

If the firm is earning less than noraml profit many firms will leave the market till the point firms start making noraml profits.

So, if firms are making excess profits in the long run many new firms will enter the market.

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