If all firms in a perfectly competitive industry are earning a normal profit,then
A) firms will be entering the industry.
B) the number of firms in the industry is stable.
C) firms will be exiting the industry.
D) firms are doing better than their next-best alternative.
E) firms are doing worse than their next-best alternative.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms will continue to enter or exit the industry until the price is equal to the minimum average total cost, resulting in zero economic profit. Therefore, if all firms are earning a normal profit, there is no incentive for new firms to enter or existing firms to exit, and the number of firms in the industry will remain stable.

If All Firms in a Perfectly Competitive Industry Are Earning