Final answer:
In the long run, profits incentivize new firms to enter the market, increasing supply and decreasing market price until economic profits are eroded and long-run equilibrium is achieved with firms earning zero economic profits.
Step-by-step explanation:
What happens to profits in the long run? When a firm makes an economic profit, it gives entrepreneurs an incentive to enter the market. These new firms will increase the demand for resources, likely causing costs to rise for all firms, including El Diablo's for its burritos. With initially few competitors, the demand for burritos is high. The firm makes an economic profit. Profit attracts new firms, which dilute the demand for an individual firm's products. New firms enter until the firm no longer earns economic profits above the normal rate of return. This happens because the entry of many new firms causes the market supply curve to shift to the right. As the supply increases, the market price starts decreasing, and with that, economic profits fall for new and existing firms. Entry will continue as long as there are profits above the normal rate, which shifts supply to the right. This process stops whenever the market price is driven down to the zero-profit level, where no firm is earning economic profits beyond the normal return, resulting in a long-run equilibrium.