One difference between the long run and the short run in a perfectly competitive industry is that:
A)economic profits in the long run are always greater than they are in the short run.
B)economic profits in the short run are always greater than they are in the long run.
C)firms necessarily earn zero economic profit in the long run but may earn positive or negative economic profit in the short run.
D)firms necessarily earn positive economic profit in the long run but may earn positive or negative economic profit in the short run.

Question

Quizplus · Accepted Answer

In the long run, firms in a perfectly competitive industry have enough time to enter or exit the market based on the level of profits. This means that in the long run, firms will adjust their production levels to the point where economic profit is zero, since any positive profits will attract new firms into the market, and any negative profits will force existing firms to exit the market. In the short run, firms may earn positive or negative economic profit, as they are not able to adjust their production levels as easily as they can in the long run. Therefore, firms necessarily earn zero economic profit in the long run but may earn positive or negative economic profit in the short run.

One Difference Between the Long Run and the Short Run