In the long run,a perfectly competitive firm earn _______ economic profits.

Question

Quizplus · Accepted Answer

In the long run, perfectly competitive firms will earn zero economic profits because in the long run, firms will enter or exit the market until all firms earn only a normal rate of return on their investment. If firms were earning positive economic profits in the long run, new firms would enter the market, increasing supply and driving down prices until profits were driven to zero. Similarly, if firms were earning negative economic profits, firms would exit the market, decreasing supply and driving up prices until profits were driven to zero. Thus, over time, perfectly competitive firms earn zero economic profits in the long run.

In the Long Run,a Perfectly Competitive Firm Earn _______ Economic