In the long run, each firm in an industry will:
A)earn only enough to cover the opportunity costs of all resources used in production.
B)produce where MR is less than MC.
C)offer more than one variation of the same good.
D)set price in coordination with other producers in the market.

Question

Quizplus · Accepted Answer

In the long run, firms in an industry will earn only enough to cover the opportunity costs of all resources used in production because if firms were earning excess profits, new firms would enter the industry, driving down profits and if firms were earning losses, some firms would exit the industry, reducing supply and driving up prices. This process of entry or exit will continue until all firms are earning just enough to cover their opportunity costs. Therefore, in the long run, firms will earn a normal profit, which is the minimum level of profit needed to keep resources employed in the industry. Choices B, C, and D are not necessarily true in the long run for every firm in an industry.

In the Long Run, Each Firm in an Industry Will