Question

Which market characteristic implies that long run profit may be greater than zero?

A. no barriers to entry
B. differentiated products
C. perfect information
D. high barriers to entry
E. "On Wednesdays we wear pink."

Answer 1

One market characteristic that implies long run profit may be greater than zero is high barriers to entry. Barriers to entry are legal, technological, or market forces that discourage or prevent potential competitors from entering a market. When there are high barriers to entry, it becomes difficult for new firms to enter the market and compete with existing firms.

Step-by-step explanation:

One market characteristic that implies long run profit may be greater than zero is high barriers to entry.

Barriers to entry are legal, technological, or market forces that discourage or prevent potential competitors from entering a market. When there are high barriers to entry, it becomes difficult for new firms to enter the market and compete with existing firms. This lack of competition allows existing firms to have more control over pricing and potentially earn long run profits.

For example, if there are limited resources or high capital requirements to enter a market, only a few established firms may be able to afford to do so. These firms can then enjoy the benefits of limited competition and potentially earn positive profits in the long run.