In the long run when a perfectly competitive firm experiences negative economic profits

Question

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In the long run, firms in a perfectly competitive industry will have zero economic profit due to the ease of entry and exit. If a firm is experiencing negative economic profits, it means it is not covering its opportunity costs and would be better off using its resources elsewhere. Therefore, the firm will exit the industry, leaving room for the remaining firms to increase their profits. This process will continue until all the firms are earning zero economic profit again. Option A is incorrect because high barriers to entry imply that the industry is not perfectly competitive. Option C is also incorrect because new firms would enter the industry only if there were positive economic profits to be made. Finally, option D is incorrect because the negative economic profits act as an incentive for firms to exit the industry.

In the Long Run When a Perfectly Competitive Firm Experiences