In long-run equilibrium, a firm in perfect competition has no economic profit.

Question

Quizplus · Accepted Answer

In perfect competition, firms can easily enter and exit the market, resulting in a situation where there are many firms selling an identical product. This means that no individual firm can influence the market price of the product. In the long run, if a firm is earning economic profits, these profits will attract new firms to enter the market. As more firms enter the market, the supply of the product increases, causing the market price to decrease until economic profits are reduced to zero. Therefore, in long-run equilibrium, a firm in perfect competition has no economic profit.

In Long-Run Equilibrium, a Firm in Perfect Competition Has No