In the long run, firms can:

Question

Quizplus · Accepted Answer

In the long run, firms have the ability to vary all inputs, including labor, capital, and technology. If a firm earns negative profit in the long run, it can choose to leave the industry as there are no fixed costs in the long run that would force it to stay. Therefore, option B is the best choice. Options A and D are not feasible as firms need to vary inputs in order to optimize their production and profits, and firms are not able to manipulate the market price in a perfectly competitive industry. Option C is also not feasible as firms cannot enter the market if they are earning negative profits in the long run.

In the Long Run, Firms Can