In a perfectly competitive industry, in the long-run equilibrium,

Question

Quizplus · Accepted Answer

In the long-run equilibrium of a perfectly competitive industry, the typical firm earns zero economic profit. This is because new firms will enter the market to take advantage of any profits being made, which increases supply and drives down prices until all firms are earning only enough revenue to cover their total costs, including opportunity costs. Additionally, in the long run, firms have the ability to adjust their inputs and processes to produce at the minimum efficient scale, which minimizes long-run average total cost. Therefore, choice A and D are incorrect. Choice B is also incorrect because the accounting profit only takes into account explicit costs and not implicit costs, such as the opportunity cost of using the owner's capital or time.

In a Perfectly Competitive Industry, in the Long-Run Equilibrium