The representative firm in a purely competitive industry
A)will always earn a profit in the short run.
B)may earn either an economic profit or a loss in the long run.
C)will always earn an economic profit in the long run.
D)will earn zero economic profit in the long run.

Question

Quizplus · Accepted Answer

In a purely competitive industry, firms will earn zero economic profit in the long run due to the entry and exit of firms, which drives the market price to the level of average total cost.

The Representative Firm in a Purely Competitive Industry