Explain producers in an industry

Question

Explain producers in an industry are receiving pure or economic profits?

Answer 1

If producers in an industry are receiving pure or economic profits, additional producers will move into the industry, the industry supply will increase, and the price will decrease thus squeezing out the economic profits. If producers in an industry are experiencing economic losses, some of these producers will exit the industry, the industry supply will decrease, and the price will increase thus eliminating the economic losses.