A Decreasing-cost Industry occurs when an economic profit is occuring in said industry. This causes more firms to enter the industry, which shifts the supply curve downward and to the right which decreases the price of the product, which leads to an economic loss. This could be because a key resource is able to take advantage of economies of scale or decreasing average cost in it is own production and supply. The entry of new firms into the cable television industry might, for example, enable lower cost of using communication satellites. The entry of new firms into the manufacturing industry in a given city might enable a lower cost of electricity.

Will firms enter the industry with an accounting profit of $4 and economic profit of $0?



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