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Question
Under perfect competition, the firm earns normal profit in the long run because of ______.
Options
large number of buyers and sellers
absence of selling cost
free entry and exit
homogeneous commodity
MCQ
Fill in the Blanks
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Solution
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.
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