what happens to an industry if a firm is making large economic profits?

When a firm in an industry is making large economic profits, it can have several implications for that industry. Here are a few possible scenarios:

1. Market Entry: The presence of high profits may attract new firms into the industry. These new entrants are motivated by the potential to earn similar profits and compete with the existing firm. Increased competition may lead to a decrease in the market share and profits for the original firm.

2. Increased Supply: In the presence of economic profits, existing firms may expand their production to take advantage of the high returns. This increase in supply can potentially lead to lower prices as the market becomes more saturated with goods or services. Consequently, the economic profits of the firm may decrease as prices fall.

3. Technological Innovation: Large profits can also incentivize firms to invest in research and development to improve their products or develop more efficient production methods. This can lead to technological advancements and innovation within the industry, benefitting both the firm and the overall sector.

4. Industry Growth: High profits can attract more investment and resources to the industry, leading to its growth. This growth could be in terms of increased production capacity, employment opportunities, and overall economic activity in the industry.

It's important to note that the specific impact on an industry can vary depending on factors such as market structures, government regulations, and the entry barriers in place.

To evaluate the potential impacts of large economic profits in an industry, one can consider studying the market conditions, competitive dynamics, regulatory environment, and the overall economic trends. Analyzing industry reports, financial statements, and conducting market research can help gain insights into the current and potential future outcomes for the industry.