Question

When economic profit is ____, the firm will ____.

a. positive; face new competition

b. positive; enjoy large economic profits for a long time

c. negative; cease to exist

d. negative; face new competition

e. zero; go out of business

Answer 1

Option a (must be) and c (second best)

assuming the firm is from perfect competition or from monopolistic competition

if the profit is positive new firms enter the market up to there is zero economic profit

Which is the best option from a and c, a is the best answer as it must face competition

but the c is not that correct if all the firms are earning negative profit then the firms with higher losses first leave the market then the lowest loss firms and maybe the firms be in the market which is not defined

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option b

assuming the market is a monopoly

if A monopoly earning profit then it can earn profit for a long time

this is not possible answer or it is third best because generally, these questions depend on the perfect or monopolistic competition