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Assume the market for ball bearings is purely competitive. Currently, each of the firms in this market is earning positive economic profits. In the long run, as adjustments occur in the industry, we can expect the market price of ball bearings to _________.A. Supply to increase and firms' profits to decrease B. Demand to increase and firms' profits to increase C. Supply to decrease and firms' profits to increase D. Demand to decrease and firms' profits to decrease

Respuesta :

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Answer:

Option C - Supply to decrease and firms' profits to increase

Explanation:

As in perfect competition there is free entry and exit of firms . Therefore, when firms are earning negative profits, we expect that some firms will leave the market . Hence, In the long run supply will fall . Then the existing firms can make zero profits since as supply curve shifts left the price rises .

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