In a perfectly competitive market,the process of entry and exit will end when,for firms in the market,

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Quizplus · Accepted Answer

In a perfectly competitive market, firms will enter when economic profits are positive and exit when economic profits are negative. This is because in the long run, there are no barriers to entry or exit, so new firms will enter the market if they see an opportunity for profit, and existing firms will exit if they are making losses. The process of entry and exit will continue until economic profits are zero, at which point there is no incentive for new firms to enter and existing firms have no reason to exit. Therefore, choice C, economic profits are zero, is the best answer. Choices A and B relate to the short-run decision of whether to shut down or operate, while choice D only relates to accounting profits, which may not reflect a firm's true economic performance.

In a Perfectly Competitive Market,the Process of Entry and Exit