In a perfectly competitive market, if a firm is earning economic profits, it indicates that the firm's total revenue exceeds its total costs, which include both explicit and __________ costs. This situation often attracts new entrants into the market, influencing supply dynamics.

In a perfectly competitive market, if a firm is earning economic profits, it means that the money it makes from selling its products is greater than all the costs associated with producing those products. These costs include not just explicit costs, like wages and materials, but also implicit costs, which are the opportunity costs of using resources in one way instead of the next best alternative. For example, if a farmer decides to grow corn instead of soybeans, the potential income from soybeans is an implicit cost of their decision. When other firms see that one firm is making economic profits, they may want to enter the market to take advantage of the opportunity, which can increase the overall supply of products. This increase in supply can eventually lead to lower prices and reduced profits for all firms in the market, demonstrating how competition affects market dynamics.