What are the possible long-run equilibrium situations for a firm in a perfectly competitive market?
A) Normal profit.
B) Economic profit.
C) Loss.
D) Product diversification.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms will continue to enter the market until profits are driven down to zero. Therefore, the only long-run equilibrium situation for a firm in a perfectly competitive market is normal profit. Economic profit and loss are short-run situations that will ultimately lead to firms exiting or entering the market until equilibrium is reached at normal profit. Product diversification is also not a possibility in a perfectly competitive market as all firms are producing homogeneous goods or services.

What Are the Possible Long-Run Equilibrium Situations for a Firm