In the long run, the perfectly competitive firm

Question

Quizplus · Accepted Answer

In the long run, the perfectly competitive firm earns only a normal profit, which means that it is only making enough revenue to cover its opportunity costs and receive a return on investment that is equal to what could have been earned elsewhere in the economy. The firm does not earn an economic profit, nor does it operate at a loss, since it can adjust its level of production to match demand and avoid oversupply. While the firm may have a minimum cost of production, it does not have a shut down price, since it can always continue to operate and cover its variable costs. Therefore, option A and C are incorrect.

In the Long Run, the Perfectly Competitive Firm