In the long run,existing firms exit a perfectly competitive market
A) only if economic profits are zero.
B) if they make a positive economic profit.
C) if normal profits are greater than zero.
D) only if they incur an economic loss.
E) if they either make a normal profit or if they incur an economic loss.

Question

Quizplus · Accepted Answer

In the long run, existing firms will exit a perfectly competitive market if they incur an economic loss. This is because in the long run, new firms are able to enter the market, which increases competition and drives down prices. If a firm is unable to cover its costs at the prevailing market price, it will exit the market. However, if a firm is making a normal profit (covering its costs but not earning an economic profit) it may continue to remain in the market.

In the Long Run,existing Firms Exit a Perfectly Competitive Market