When a perfectly competitive firm is in long-run equilibrium, economic profits

Question

Quizplus · Accepted Answer

In long-run equilibrium, the perfectly competitive market will have zero economic profits because any firm earning profits will attract new firms to enter the market, which will increase competition, decrease prices, and drive profit down to zero. Similarly, firms earning losses will exit the market, reducing competition and increasing prices until profits return to zero. Therefore, in long-run equilibrium, all firms will be earning just enough revenue to cover their costs, resulting in zero economic profits.

When a Perfectly Competitive Firm Is in Long-Run Equilibrium, Economic