In perfectly competitive markets, an implication of entry and exit in response to economic profit and loss is that:
A)firms must earn positive economic profit in the long run.
B)firms will produce the quantity that minimizes average variable costs in the short run.
C)firms will produce the quantity that minimizes average total costs in the long run.
D)market demand is completely elastic.

Question

Quizplus · Accepted Answer

Due to entry and exit in a perfectly competitive market, firms earn zero economic profit in the long run, meaning that they produce the level of output that corresponds to the minimum of their average total cost curve.

In Perfectly Competitive Markets, an Implication of Entry and Exit