Which characteristic of perfect competition ensures that economic profit will be zero in the long run?

Question

Quizplus · Accepted Answer

In perfect competition, there are no barriers to entry or exit in the market. This means that if firms are making economic profit, new firms will enter the market to take advantage of the profits. As more firms enter, the supply of the product increases, which drives down the price until no economic profit is being made. Similarly, if firms are making losses, some firms will exit the market. As the number of firms decreases, the supply decreases, which drives up the price until economic profit is zero. Therefore, in the long run, economic profit will be zero in a perfectly competitive market.

Which Characteristic of Perfect Competition Ensures That Economic Profit Will