Question

In the long run, firms in a competitive market a shut down because profit goes to...

In the long run, firms in a competitive market

a

shut down because profit goes to zero.

b

lose money.

c

are not profit maximizing.

d

earn zero economic profit.
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Answer #1

A perfect competition is a market structure type in which

There are large number of buyers and sellers in the market

Price is decided only by the market forces that is demand and supply

There are no barriers to entry and exit

Long term economic profit is zero

The long-term economic profit is also called earning normal profit in the long run by the firms

A shutdown occurs when price is less than the average variable cost

But here no data is given so in the long run the firms will end up with earning economic profit as zero

Hence the answer is option D

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