When a perfectly competitive market is in long-run equilibrium

Question

Quizplus · Accepted Answer

In the long-run equilibrium of a perfectly competitive market, all firms make zero economic profit. This occurs because in the long run, firms have enough time to enter or exit the market, which results in the price decreasing if firms are making a profit, or increasing if firms incur a loss. As a result, firms earn just enough revenue to cover their costs, including an opportunity cost of the resources used in production, but not enough to generate an economic profit.

When a Perfectly Competitive Market Is in Long-Run Equilibrium