Answer:
The correct answer is option A.
Explanation:
In a perfect competition, there is no restriction on entry or exit of firms. So, when firms earn positive economic profits, it attracts other firms to enter the market. When new firms join it leads to an increase in supply.
The short run supply curve shifts to the right, causing the price level to fall. The total output in the market will increase. It would lead to reduction n profit.
The process of new firms entering the market will continue till all the profits is exhausted.
