Answer to Question #114990 in Microeconomics for Siya

Question

When economic profits exists for a firm, it is very tenuous because:
1) costs will inevitably increase and eliminate profit
2) price will fall because market supply will increase
3) firms are driven to increase output to the point where average total cost will equal price
4) firms are driven to reduce output until average total cost equals price

Answer 1

When economic profits exists for a firm, it is very tenuous because:

3) firms are driven to increase output to the point where average total cost will equal price