Regardless of the cost structure of firms in a competitive market, in the long run
A)firms will experience rising demand for their products.
B)the marginal firm will earn zero economic profit.
C)firms will experience a less competitive market environment.
D)exit and entry is likely to lead to a horizontal long-run supply curve.

Question

Quizplus · Accepted Answer

In the long run, firms in a competitive market will earn zero economic profit. This is because any profits earned in the short run will attract new firms to enter the market and increase competition, causing prices to decrease and profits to eventually disappear. The marginal firm (the firm that just breaks even) will be the one that determines the long-run supply curve. Therefore, the long-run supply curve will be horizontal at the minimum point of the average total cost curve, and the marginal firm will earn zero economic profit.

Regardless of the Cost Structure of Firms in a Competitive