Under perfect competition

Question

Quizplus · Accepted Answer

Under perfect competition, there are no barriers to entry or exit, and firms can easily enter or leave the market to compete with other firms, which means that in the long run, the profits should be zero as new firms enter the market and the supply increases, lowering the price and bringing economic profits down to zero. Therefore, option D is the correct statement. Option A is incorrect because accounting profits are equal to economic profits in perfect competition. Option B is not necessarily true because the most efficient output may not always be the most profitable, as the firm's profits depend on the market price, which can fluctuate. Option C is also incorrect because in the long run, the firm's demand and marginal revenue curves should be equal.

Under Perfect Competition