The marginal firm in a competitive market will earn zero economic profits in the long run.

Question

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In a competitive market, firms will continue to enter the market as long as there are economic profits to be made. This increased competition will eventually drive down prices and decrease the economic profits of firms. The marginal firm, which is the firm operating at the minimum point on its average total cost curve, will earn zero economic profits in the long run as it will only be earning enough revenue to cover its costs.

The Marginal Firm in a Competitive Market Will Earn Zero