When a perfectly competitive firm or a monopolistically competitive firm is making zero economic profit,
A) no firms will want to enter or exit.
B) some firms will want to leave.
C) some firms will want to enter.
D) market demand shifts to the left.

Question

Quizplus · Accepted Answer

When a firm is making zero economic profit, it means that it is covering all its costs, including the opportunity costs. In this situation, there is no incentive for new firms to enter the market (since there are no extra profits to be captured) and no incentive for existing firms to exit (since they are covering their costs). This equilibrium situation leads to no firms wanting to enter or exit.

When a Perfectly Competitive Firm or a Monopolistically Competitive Firm