Let’s review the basic mechanism of the elimination principle.
a. When demand rises in Industry X, what happens to profits? Do they rise, fall, or remain unchanged?
b. When that happens, do firms, workers, and capital tend to enter Industry X, or do they tend to leave?
c. Does this tend to increase short-run supply in Industry X or reduce it?
d. In the long run, after this rise in demand, what will profits typically be in Industry X?