If each firm is initially earning positive profits in a perfectly competitive industry, then there will be entry of new firms, price will fall, and the output of each firm will fall in the long- run equilibrium.

Question

Quizplus · Accepted Answer

In the long-run equilibrium of a perfectly competitive industry, new firms will enter the market, leading to an increase in supply and a decrease in price. The decrease in price will result in a decrease in the profits of each firm, and as a result, their output will also decrease to reach a point where they earn only normal profits. Therefore, the statement is true.

If Each Firm Is Initially Earning Positive Profits in a Perfectly