A firm ________ if it earns zero economic profit.
A) earns a negative rate of return
B) will leave the industry
C) earns a positive but below normal rate of return
D) earns exactly a normal rate of return

Question

Quizplus · Accepted Answer

When a firm earns zero economic profit, it means that it is covering all its explicit and implicit costs, including a normal rate of return on its capital. This is considered breaking even in economic terms, not a signal to leave the industry or an indication of underperformance.

A Firm ________ If It Earns Zero Economic Profit