Which statement is true about a firm that earns ZERO economic profit?

Question

Quizplus · Accepted Answer

Economic profit is the profit that remains after considering the opportunity cost of resources used for a project. If a firm earns zero economic profit, it means that the NPV (net present value) of projects the firm considers is equal to zero, i.e. the revenue earned is just enough to cover the costs incurred including the opportunity cost of resources used. This is a typical scenario in a competitive environment where firms earn only a normal profit, i.e. the minimum required to keep the resources invested in a project from being re-allocated elsewhere. Accounting income for projects may be positive or negative. A non-competitive environment would have allowed the firm to earn a higher profit than what it is currently earning. High entry barriers to other firms may not necessarily be true, especially if the industry is competitive.

Which Statement Is True About a Firm That Earns ZERO