Explain In a market economy with open competition by Dr. Robert Murphy

Question 79 / 96: Explain: "In a market economy with open competition, there is a tendency for monetary profits and losses to be whittled away over time, as entrepreneurs adjust to the situation."

Answer:

If the prices in a certain industry allow the firms to reap large

monetary profits, this will tend to attract competitors. By producing

more of the finished good (or service), they push down

its price, and by buying more of the inputs needed to produce

it, they push up the costs of production. Thus the overall profit

margin shrinks. The reverse happens in an industry suffering

from monetary losses.

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https://www.jobilize.com/capitalism-the-market-economy-by-dr-robert-murphy-mises

Capitalism: The Market Economy

Access: Public Peer Review

Dr.Robert MurphyAssociated Scholar

Mises Institute

USA

Attribution: Dr. Robert P. Murphy, Lessons for the Young Economist. (Mises Institute), http://mises.org/document/6215/Lessons-for-the-Young-Economist (Accessed 04 April, 2014). License: Creative Commons BY

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