A perfectly competitive firm would be willing to remain in the industry in the long run at zero economic profit because

Question

Quizplus · Accepted Answer

A perfectly competitive firm produces where marginal cost equals marginal revenue, which also equals price. In the long run, firms can enter or exit the industry. If there are positive economic profits, other firms will enter the industry, increasing supply and decreasing price until economic profits are zero. At zero economic profit, the firm's revenue is equal to all costs, including the opportunity cost of capital and labor. The firm is earning a fair return on its resources and has no incentive to leave the industry.

A Perfectly Competitive Firm Would Be Willing to Remain in the Industry