In the long run,a perfectly competitive firm
A) can make either an economic profit or a normal profit.
B) incurs an economic loss.
C) makes zero economic profit.
D) can make an economic profit, zero economic profit, or incur an economic loss.
E) makes an economic profit.

Question

Quizplus · Accepted Answer

In the long run, perfectly competitive firms will only be able to make zero economic profit due to the ease of entry into the market. If a firm makes an economic profit, new firms will be attracted to the market, increasing supply and driving down prices until the profit is eliminated. If a firm incurs an economic loss, existing firms will exit the market, decreasing supply and driving up prices until the loss is eliminated. Therefore, the only sustainable position for a perfectly competitive firm in the long run is to make zero economic profit.

In the Long Run,a Perfectly Competitive Firm