Question

In the long run, perfect competitive firms

Select one:

A. achieve a loss

B. achieve profit

C. achieve zero profit

D. shutdown

Answer 1

C. achieve zero profit

Explanation :

In perfect competition, there are many firms and free entry and exit in the market. So, when there is positive economic profit, new firm have incentive to enter the market so, supply curve shifts to the right and price decreases. When there is negative profit in the market, existing firms will exit the industry and supply shifts to the left and price will increase. At the end of this process, in the long run, all firms in perfect competition will earn zero economic profit.