It is possible for firms in a competitive market to earn positive accounting profits in the long-run.

Question

Quizplus · Accepted Answer

In a competitive market, firms may earn positive accounting profits in the short run due to factors such as temporary market inefficiencies or a unique product or service. However, in the long run, new firms will enter the market, driving down prices and reducing profit margins. Hence firms may only earn normal profits in the long run.

It Is Possible for Firms in a Competitive Market to Earn