An implication of entry and exit in response to the profit incentive is that,for perfectly competitive firms,
A)no firm accepts zero economic profits in the long run.
B)firms produce the quantity that minimizes average variable costs in the short run.
C)firms produce the quantity that minimizes average total costs in the long run.
D)demand is completely inelastic.

Question

Quizplus · Accepted Answer

In the long run, firms in a perfectly competitive market will continue to enter the industry as long as economic profits are greater than zero and exit as long as economic profits are less than zero. This means that in the long run, firms will produce the quantity that minimizes average total costs, as they will be able to earn zero economic profit. Therefore, choice C is the correct answer.

An Implication of Entry and Exit in Response to the Profit