In the long run, a perfectly competitive firm earning zero economic profits
A)will exit the market in search of more profitable use of its resources
B)is earning a normal rate of return on its investments
C)signifies that the firm is performing poorly and so should exit the market
D)will break even

Question

Quizplus · Accepted Answer

In a perfectly competitive market, earning zero economic profits means that the firm is covering all its costs, including opportunity costs, and earning a normal rate of return on its investments. This is considered a normal and sustainable situation for firms in such markets.

In the Long Run, a Perfectly Competitive Firm Earning Zero