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#title: High profits are a result of scarcity power date: March 29, 2020 tags: economics, profit, scarcity

When it is easy for new competitors to enter an industry, high profits typically mean that a business really does offer some scarce, valuable resource (e.g. superior service or product). In this case, the market is operating efficiently [1].

However, if it is difficult to enter an industry, either due to licensing requirements, regulations, or high cost to entry ("green belts"), then that scarcity is artificial and the market is acting inefficiently.

#References

  1. Harford, Tim. The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor--and Why You Can Never Buy a Decent Used Car! Oxford ; New York: Oxford University Press, 2006.