Question

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then some existing firms in this market will leave. new firms will enter this market. the selling price for this firm is above the market equilibrium price. there must be price fixing by the industry's firms.:

Answer 1

Answer: New firms will enter this market.

Step-by-step explanation:

If firms see that a firm is making economic profit in a competitive market, they will enter the market in an attempt to make some economic profit for themselves as well and they will be able to do so because Competitive markets have no barriers to entry.

New firms will keep coming into the market until the economic profit becomes zero. If the economic profit goes to less than zero, some firms will leave the market and push the market back up to making zero economic profit. And if economic profit becomes positive again, more firms will enter. In the long run therefore, economic profit is zero.