A firm will only earn normal profit in the long run
A)if firms can freely enter or leave the market
B)if firms do not try to maximize profit
C)only if the industry is perfectly competitive
D)whenever products are not differentiated
E)if barriers to entry exist

Question

Quizplus · Accepted Answer

A firm can only earn normal profit in the long run if firms can freely enter or leave the market. In a perfectly competitive market, firms are unable to earn economic profits in the long run due to the absence of barriers to entry or exit. However, in a monopolistic or oligopolistic market structure, firms may be able to earn above-normal profits in the long run if barriers to entry exist, but this would not be considered normal profit. Therefore, the best choice is A.

A Firm Will Only Earn Normal Profit in the Long