Firms will continue to join this market until the industry as a whole begins to make a typical economic profit. To encourage new enterprises to enter the market, short-term profits motivate them to do so. In the long run, businesses will produce a normal or even negative economic profit.
What is a competitive industry?
Companies may join and depart the market easily in a competitive sector since there are minimal barriers to entry.
Generally, the equation for Profit per unit is mathematically given as
P= Price - ATC
Therefore
P= $7.49 - $6.63
P= $0.86
In conclusion, Profits in the short term encourage new businesses to join the market. Firms will make a typical or even negative economic profit in the long term.
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