Question

Which of the following statements is correct?(A) Normal profits will cause an industry to expand.(B) Economic profits and losses have no significant impact on the growth or decline of an industry.(C) Economic profits induce firms to leave an industry; profits encourage firms to leave.(D) Economic profits induce firms to enter an industry; losses

Answer 1

Answer: The correct option in this case is (c). i.e. Economic profits induce firms to enter an industry and losses encourage firms to leave

Economic profits is the difference between total revenues and total costs excluding opportunity cost.  

For a instance when a firm generates economy profits then in that scenario it will be profitable to continue and expand .