A firm operating in a perfectly competitive market may earn positive, negative, or zero economic profit in the long run.

Question

Quizplus · Accepted Answer

In the long run, a firm in a perfectly competitive market can only earn zero economic profit due to free entry and exit of firms, which drives economic profits to zero as firms enter the market if there are profits to be made, and exit if they are making losses.

A Firm Operating in a Perfectly Competitive Market May Earn