Question

In long-run industry equilibrium under perfect competition, firms ______.

Options

• Earn supernormal profits

• Always incur losses

• Earn only normal profits

• Stop producing

Answer 1

In long-run industry equilibrium under perfect competition, firms earn only normal profits.

Explanation:

In the long run, entry and exit of firms continue until all firms earn only normal profits, so no new firm wants to enter and no existing firm wants to leave.