Answer:
1. **Selling at a Price Higher than Market Determined Price:**
- If a firm tries to sell its products at a price higher than the market-determined price, it is likely to face challenges. In a competitive market, consumers have choices, and they are likely to opt for alternatives that offer a better value for their money. The firm may experience a decrease in demand for its products as consumers shift to more affordable options. This can lead to surplus inventory, reduced sales, and potential financial losses for the firm. Pricing above the market equilibrium may also attract regulatory scrutiny or legal actions in some cases.
2. **Role of Above Normal Profits in Driving Down Prices for Consumers:**
- Above normal profits, also known as economic profits, often attract new competitors to enter the market. When firms observe that a particular industry is generating high profits, they are motivated to enter and compete for a share of those profits. This increased competition typically leads to an expansion in the supply of goods or services. As the market becomes more saturated, firms may engage in price competition to gain a competitive edge and attract customers. This heightened competition tends to drive prices down, benefiting consumers by offering them goods or services at lower prices. In this way, above normal profits act as a signal for new entrants to join the market, ultimately contributing to a more competitive and consumer-friendly pricing environment.
