Which of the following is a condition for long-run equilibrium in a competitive industry?
A)Each firm in the industry is earning zero economic profit.
B)The inputs employed in the industry earn less than they would had they been used elsewhere.
C)Each firm in the industry will produce that level of output at which marginal cost is the lowest.
D)The number of new entrants into the industry is positive.

Question

Quizplus · Accepted Answer

In long-run equilibrium, each firm in the industry is earning zero economic profit. If firms in the industry were earning economic profit, this would attract new firms into the industry, which would increase supply and drive down prices until profits were reduced to zero. If firms were earning losses, some firms would exit the industry, which would reduce supply and drive up prices until profits returned to zero. Therefore, zero economic profit is the condition for long-run equilibrium in a competitive industry.

Which of the Following Is a Condition for Long-Run Equilibrium