In long-run equilibrium for a perfectly competitive industry, firms earn ________ economic profits and produce ________.
A) zero; efficiently
B) zero; inefficiently
C) positive; efficiently
D) positive; inefficiently

Question

Quizplus · Accepted Answer

In long-run equilibrium, perfectly competitive firms earn zero economic profits because any positive economic profits would attract new firms into the industry, increasing supply and driving down prices and profits. They produce efficiently because they minimize average total costs to survive in the market.

In Long-Run Equilibrium for a Perfectly Competitive Industry, Firms Earn