In a long-run equilibrium in a perfectly competitive industry, no firm will want to
A) exit the industry because it is earning an amount at least equal to its opportunity cost
B) enter the industry because it will not be able to make extra-normal profits
C) Both answers are correct

Question

Quizplus · Accepted Answer

In a perfectly competitive industry, firms will continue producing in the long run as long as they are earning enough revenue to cover their opportunity cost, meaning they are earning zero economic profit. If a firm were earning extra-normal profits, new firms would enter the industry, driving down prices and reducing profits for all firms. Similarly, if a firm were earning below its opportunity cost, it would exit the industry. Therefore, in a long-run equilibrium, no firm will want to exit the industry or enter the industry, as both options would lead to lower profits.

In a Long-Run Equilibrium in a Perfectly Competitive Industry, No