Economic profit in the long run in perfect competition is positive.

Question

Quizplus · Accepted Answer

In perfect competition, there are no barriers to entry, and firms can freely enter or exit the market. In the long run, this leads to an increase in supply, which drives down the price of the product to the point where firms earn only normal profits (i.e., sufficient to cover all opportunity costs, including normal returns to capital). As a result, economic profit in the long run is zero, not positive.

Economic Profit in the Long Run in Perfect Competition Is