Question

Under perfect competition, the firm earns normal profit in the long run because of ______.

पर्याय

• large number of buyers and sellers

• absence of selling cost

• free entry and exit

• homogeneous commodity

Answer 1

Under perfect competition, the firm earns normal profit in the long run because of free entry and exit.

Explanation:

When firms earn supernormal profits, new firms enter and increase industry supply, lowering price and profits. Firms exit when they incur losses; in the long run, this process leaves firms earning only normal profit.