Practicing Success
Practicing Success
CUET Preparation Today
| With free entry and exit, each firm will always earn ____ at the prevailing market price. |
Normal Abnormal Supernormal Usual |
| Normal |
| With free entry and exit, each firm will always earn normal profit at the prevailing market price. Suppose, at the prevailing market price, each firm is earning supernormal profit. The possibility of earning supernormal profit will attract some new firms. As new firms enter the market supply curve shifts rightward. However, demand remains unchanged. This causes market price to fall. As prices fall, supernormal profits are eventually wiped out. |
