If perfectly competitive firms are maximizing their profit and are making an economic profit,the market ________ in a short-run equilibrium and ________ in a long-run equilibrium.
A) is; is
B) is; is not
C) is not; is
D) is not; is not
E) is; might be

Question

Quizplus · Accepted Answer

In a short-run equilibrium, perfectly competitive firms can make economic profits, indicating the market is in equilibrium as firms are maximizing profit. However, in the long-run, economic profits attract new firms, increasing supply and driving down prices until economic profits are zero, indicating the market is not in equilibrium as firms adjust.

If Perfectly Competitive Firms Are Maximizing Their Profit and Are