Question

When a perfect competitive industry is in long-run equilibrium,

a. Firm have no incentive to enter o exit the industry.
b. Market price is equal to minimum long-run average cost.
c. Each firm earns a normal return.
d. Both a ande
e. All of the above

Answer 1

e. All of the above

Step-by-step explanation:

A perfect competition is characterised by many buyers and sellers of identical products. Firms in a perfect competition are price takers.

In the long run, a perfect competitive firm produces where:

Price = marginal cost = marginal revenue = average long run cost. Producing at this point eliminates all forms of economic profit. Therefore, the firm earns only normal profit.

In the long run , there is zero economic profit, therefore, there would be no incentive for firms to enter into the market.