Martha is one producer in the perfectly competitive jelly industry. Last year, Martha and all of her competitors found themselves earning economic profits.
a. If entry and exit from the jelly industry are free, what do you expect to happen to the number of suppliers in the industry in the long run?
b. Because of the entry/exit you described in part (a), what do you expect to happen to the industry supply of jelly? Explain.
c. As a result of the supply change you described in part (b), what do you expect to happen to the price of jelly? Why?
d. As a result of the price change you indicated in part (c), how will Martha adjust her output?