It is not possible for the marginal firm in a competitive market to make an economic profit in the long-run.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the marginal firm will only be able to make normal profit in the long-run. Economic profit is the difference between total revenue and total cost, whereas normal profit is the minimum amount of profit necessary to keep the firm in operation. In the long-run, firms may enter or exit the market and increase or decrease supply, which will ultimately drive prices down to the point where no firm makes economic profit. Therefore, the marginal firm in a competitive market can only earn normal profit in the long-run.

It Is Not Possible for the Marginal Firm in a Competitive