00:01
In the long run, no one in a perfectly competitive industry can make an economic profit.
00:38
It only exists in the short run.
00:51
So if an economic profit or profit is being made, then businesses are going to want to capitalize on that.
00:57
And they're either going to do that by entering or expanding their output, which is option a.
01:03
Because basically, the market will shrink or expand to the point where economic profit of all firms equals zero in the long run.
01:46
And if we look at some of our other choices, if we look at b, where it says either firms will exit or existing firms will cut back production, that doesn't make sense.
01:54
If they're earning a profit, they're not going to exit the market and they're not going to cut back.
01:58
They're going to want to capitalize on that...