In long-run perfectly competitive equilibrium:

Question

Quizplus · Accepted Answer

In the long-run equilibrium in a perfectly competitive market, all firms earn zero economic profits. This is because new firms will enter the market and drive down the price to the point where all firms earn only a normal rate of return on their investment, resulting in zero economic profit. If firms were earning positive economic profits, new firms would enter the market, increasing supply and driving down prices until profits were only normal. If firms were suffering economic losses, firms would exit the market, reducing supply and driving up prices until profits were only normal. Therefore, in the long-run equilibrium, all firms earn zero economic profits.

In Long-Run Perfectly Competitive Equilibrium