Which of the following assumptions about perfectly competitive markets is primarily responsible for firms having zero economic profit in long run equilibrium?

Question

Quizplus · Accepted Answer

Freedom of entry and exit in the industry allows for new firms to enter when there are positive economic profits, increasing competition and driving prices down. In the long run, firms will only earn normal profits, as any excess profits will attract new entrants to the market, and any losses will cause existing firms to exit the market. This leads to zero economic profits in long run equilibrium.

Which of the Following Assumptions About Perfectly Competitive Markets Is