In the long run,a perfectly competitive firm makes
A) a positive economic profit.
B) zero economic profit.
C) negative economic profit, that is, an economic loss.
D) zero accounting profit.
E) either a positive economic profit or a normal profit.

Question

Quizplus · Accepted Answer

In the long run, firms in perfectly competitive markets have free entry and exit, meaning that if a firm is making a positive economic profit, other firms will enter the market and drive down prices until economic profits are driven to zero. If the firm is making negative economic profit, some firms will exit the market, which will decrease supply and increase prices until economic profits are driven to zero. Therefore, in the long run, a perfectly competitive firm will make zero economic profit, as all factors of production will be paid their opportunity cost, including the owners of the firm.

In the Long Run,a Perfectly Competitive Firm Makes