When a perfectly competitive firm or a monopolistically competitive firm is making zero economic profit,
A) no firms will want to enter or exit.
B) some firms will want to leave.
C) some firms will want to enter.
D) market demand shifts to the left.
E) the price of the output will rise in the long run.

Question

Quizplus · Accepted Answer

When a firm is making zero economic profit, it means that it is covering all its costs, including opportunity costs. In this situation, there is no incentive for new firms to enter or existing firms to exit the market, as they are earning a normal return on their investment.

When a Perfectly Competitive Firm or a Monopolistically Competitive Firm