The figure below shows a long-run industry supply curve (S LR ) and the demand curve (D) facing the competitive industry. The firms in this industry employ inputs of varying quality and productivity.

-"The firms employing the superior inputs have lower costs than their rivals, but they still cannot earn any profit." Is this statement true or false?

Question

The figure below shows a long-run industry supply curve (S LR ) and the demand curve (D) facing the competitive industry. The firms in this industry employ inputs of varying quality and productivity.
 
-"The firms employing the superior inputs have lower costs than their rivals, but they still cannot earn any profit." Is this statement true or false?

Quizplus · Accepted Answer

The statement is true because the firms with superior inputs have lower costs, but they are unable to earn any profit due to perfect competition. In perfect competition, the price of a good or service is determined by the market, and firms are price takers. This means that firms cannot set their own prices, and they must sell their products at the market price. As a result, firms with superior inputs are unable to earn any profit because they cannot charge a higher price for their products.

The Figure Below Shows a Long-Run Industry Supply Curve (SLR)

The Figure Below Shows a Long-Run Industry Supply Curve (S_LR)