You can tell a firm is operating in a market that is in long-run competitive equilibrium if:
A) economic profits are positive.
B) economic profits are negative.
C) your accountant tells you profits are negative.
D) your accountant tells you profits are zero.
E) economic profits are zero.

Question

Quizplus · Accepted Answer

In long-run competitive equilibrium, firms are earning only normal profits (zero economic profits). This is because in a perfectly competitive market, there are no barriers to entry or exit, meaning that firms cannot earn sustained economic profits in the long run. Therefore, option E, economic profits are zero, is the correct choice.

You Can Tell a Firm Is Operating in a Market