In the long run in a perfectly competitive industry

Question

Quizplus · Accepted Answer

In the long run, perfect competition drives economic profits to zero because in the presence of no barriers to entry, firms can enter the industry and compete away any profits. While some firms may experience economic losses in the short run, in the long run they will either exit the market or adjust their production to reach a break-even point. Therefore, economic profits cannot persist in the long run in a perfectly competitive industry.

In the Long Run in a Perfectly Competitive Industry