In short-run competitive equilibrium, which of the following is always true?
A) Profit equals zero.
B) Profit can be negative, zero, or positive.
C) Profit can be zero or positive, but not negative.
D) Profit is positive, otherwise firms would not produce.

Question

In short-run competitive equilibrium, which of the following is always true?
A) ​Profit equals zero.
B) ​Profit can be negative, zero, or positive.
C) ​Profit can be zero or positive, but not negative.
D) ​Profit is positive, otherwise firms would not produce. ​

Quizplus · Accepted Answer

In short-run competitive equilibrium, firms can earn negative, zero, or positive profits. If profits are negative, some firms may exit the market in the long run. If profits are positive, this will attract new firms to enter the market, which will increase competition and decrease profits in the long run. Therefore, in the long run, firms in a competitive market will earn zero economic profit.

In Short-Run Competitive Equilibrium, Which of the Following Is Always