Entry competes profit away

Step by step

1. 1

   Start with the firm earning profit, the box is green.

2. 2

   Profit is a signal: rivals enter, industry supply grows, the market price slides down.

3. 3

   Entry stops only when price touches minimum AC, zero economic profit, the long-run resting point.

Where this shows up

Examiners ask this as: entry zero profit, long run competition, profits attract entry.