The long-run competitive equilibrium model describes what happens to an industry after
A)all existing firms disappear.
B)only one firm survives.
C)the government intervenes.
D)the entry and exit of firms over time.
E)the market no longer exists.

Question

Quizplus · Accepted Answer

The long-run competitive equilibrium model describes the entry and exit of firms over time. In the long-run, if firms are earning profits, new firms will enter the market, and if firms are earning losses, some existing firms will exit the market. This process will continue until firms in the industry are earning zero economic profit and are operating at their efficient scale. Therefore, option D is the correct choice. A, B, C, and E are not relevant to the long-run competitive equilibrium model.

The Long-Run Competitive Equilibrium Model Describes What Happens to an Industry