In the long run, firms in markets that are ________ earn zero economic profits.

Question

Quizplus · Accepted Answer

Firms in perfectly competitive markets earn zero economic profits in the long run due to easy entry and exit of firms, which leads to competition driving down profits to zero. Similarly, firms in monopolistically competitive markets also earn zero economic profits in the long run as differentiated products and limited market power allows for entry of new firms and price competition, driving profits to zero.

In the Long Run, Firms in Markets That Are ________