Suppose a competitive industry has excess supply represented by a high number of firms producing...
Question:
Suppose a competitive industry has excess supply represented by a high number of firms producing surplus output. As the industry reaches long-run equilibrium, what happens to economic profits for firms in the industry?
Competitive Industry:
Generally, we expect competitive industries to be making a short-run economic profit. However, there can be special situations where this does not occur because the supply in the market is too high.
Answer and Explanation: 1
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View this answerIn the short run, all firms will be incurring a loss as the price is too low because the supply is too high. In the long run, the firms that are...
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Competitive Market: Definition, Characteristics & Examples
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Chapter 3 / Lesson 19
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Learn the competitive market definition and explore characteristics of a competitive market. Study competitive market examples that illustrate these characteristics.
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