In a perfectly competitive industry, in the long-run equilibrium
A)the typical firm is producing at the output where its long-run average total cost is not minimised.
B)the typical firm is earning an accounting profit greater than its implicit costs.
C)the typical firm earns zero profit.
D)the typical firm is maximising its revenue.

Question

Quizplus · Accepted Answer

In the long-run equilibrium of a perfectly competitive industry, since there are no barriers to entry or exit, firms can easily enter or exit the market based on the profits or losses they are making. As a result, the market forces will drive the price down to the level where the typical firm earns zero economic profit (i.e. total revenue equals total cost including the opportunity cost of resources used, also known as implicit costs). Therefore, in the long-run equilibrium of a perfectly competitive industry, the typical firm earns zero profit.

In a Perfectly Competitive Industry, in the Long-Run Equilibrium