Perfectly competitive firms always earn economic profits in the short run.

Question

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In the short run, perfectly competitive firms may earn economic profits or losses depending on the market price and their production costs. If the price is above their average total cost, they will earn profits, while if the price is below their average total cost, they will incur losses. However, in the long run, competitive firms will earn zero economic profits due to free entry and exit of firms, which will drive prices down to the level of minimum average total cost.

Perfectly Competitive Firms Always Earn Economic Profits in the Short