When firms in a perfectly competitive industry are experiencing economic profits

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    there is no incentive for new firms to enter the market since they can easily earn a comparable rate of return in other markets.
     firms earn above normal profits until demand falls, which causes price and marginal revenue to fall until economic profits are equal to zero.
     new firms enter the industry in pursuit of above normal profits, which causes the price to fall to the point where firms are earning a zero economic profit.
     new firms attempt to enter the market in pursuit of above normal profits but are unable to due to barriers to entry.
asked Jun 2, 2013 in Economics by anonymous
    

1 Answer

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new firms enter the industry in pursuit of above normal profits, which causes the price to fall to the point where firms are earning a zero economic profit.
answered Jun 3, 2013 by Xyz ~Expert~ (3,650 points)

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