Suppose that firms in the perfectly competitive potato-growing industry are earning economic profits. According to economic theory, what is likely to happen?
a. The costs of the firms will increase, eventually eliminating the profit.
b. The existence of profits will lead to a drop in the demand for potatoes.
c. More firms will enter the market, thereby increasing the industry supply and lowering the market price.
d. More firms will enter the market, thereby decreasing the industry supply and raising the market price.
Answer: c. More firms will enter the market, thereby increasing the industry supply and lowering the market price.
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