A purely competitive firm
A)must earn a normal profit in the short run.
B)cannot earn economic profit in the long run.
C)may realize either economic profit or losses in the long run.
D)cannot earn economic profit in the short run.

Question

Quizplus · Accepted Answer

In a purely competitive market, firms can earn economic profits in the short run due to varying market conditions. However, in the long run, the entry of new firms into the market eliminates these economic profits, leading to a situation where firms only earn a normal profit. This is because the ease of entry and exit in purely competitive markets ensures that any economic profit is competed away over time.

A Purely Competitive Firm