Question

The marginal firm in a competitive market will earn zero economic profit in the long run. True or False? Explain

Answer 1

The answer is True

The conduct of the cost of production as firms in the industry increase or decrease their output has major consequences for the long-term supply curve of the industry, a curve that relates the price of a good or service to the quantity produced after all long-term changes to the demand shift have been made. Consequently, each point on the long-term supply curve shows the price and quantity supplied at which firms in the industry receive zero economic benefit. Like the short-term supply curve of the sector, the long-term supply curve of the industry does not keep the cost of the product and the number of firms unchanged.