A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

Question

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In a competitive market, a profit-maximizing firm will earn zero economic profits in the long run due to free entry and exit, but it can still earn positive accounting profits. Economic profits account for both explicit and implicit costs, including opportunity costs, while accounting profits only consider explicit costs.

A Profit-Maximizing Firm in a Competitive Market Will Earn Zero