The absence of barriers to entry and exit in a perfectly competitive market allows ﬁrms to make supernormal proﬁts in the long run.

Question

Quizplus · Accepted Answer

The absence of barriers to entry and exit in a perfectly competitive market drives profits down to zero in the long run, as new firms enter the market, increasing competition and driving down prices. Therefore, firms cannot make supernormal profits in the long run.

The Absence of Barriers to Entry and Exit in a Perfectly